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Does EU Cohesion Policy Work? Theory and Evidence

Davide Fiaschi (), Andrea Lavezzi () and Angela Parenti ()

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: This paper evaluates the effectiveness of European Cohesion Policy in the regions of 12 EU countries in the period 1991-2008, on the basis of a spatial growth model which allows for the identification of both direct and indirect effects of EU funds on GDP per worker growth. We find that "Objective 1" funds are characterized by strong spatial externalities and a positive and concave effect on the growth of GDP per worker, which reaches a peak at the ratio funds/GDP of approximately 3% and becomes non-significant after 4%. "Objective 2" and "Cohesion" funds have non-significant effects, while all the other funds exert a positive and significant effect, but their size is very limited. EU Cohesion Policy, moreover, appears to have increased its effectiveness over time. In the period 2000-2006 Objective 1 funds are estimated to have a median multiplier equal to 1.52, and to have added 0.37% to the GDP per worker growth. Overall, in the period 1991-2008 funds are estimated to have added 1.4% to the median annual growth, and to have reduced regional disparities of 8 basis points in terms of the Gini index.

Keywords: European regional disparities; European regional policy; spatial spillovers; Structural and Cohesion Funds; spatial panel model (search for similar items in EconPapers)
JEL-codes: C21 E60 O52 R11 R12 (search for similar items in EconPapers)
Date: 2017-01-01
New Economics Papers: this item is included in nep-eur, nep-geo and nep-mac
Note: ISSN 2039-1854
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