Measuring the effects of European Regional Policy on economic growth: A regression discontinuity approach

Abstract

Abstract. Given the increasing share of the EU budget devoted to Regional Policy, several studies have tried to identify the impact of structural funds on economic growth. However, so far no consensus has been reached. We assess Regional Policy effects through a non-experimental comparison group method, the regression discontinuity design, and a novel regional dataset for the 1994-2006 period. We exploit the allocation rule of EU transfers by comparing regions with a per capita GDP level just below the eligibility threshold (75% of EU average) with those just above. Our findings show a positive impact of EU Regional Policy on economic growth. JEL classification: O18, O47, C14

European structural funds during the crisis: evidence from Southern Italy

“…By using standard regression techniques, the effectiveness of the EU financing for regional GDP growth was questioned by Boldrin and Canova (2001) and Sala-i-Martin (1996). Recently, however, by employing RDD (regression discontinuity design) identification strategies that exploit the 75% threshold for Objective 1 (which is the bulk of cohesion policy and European transfers) eligibility, Becker et al (2010) and Pellegrini et al (2013) argue that the receipt of Structural Funds is associated with an annual per capita GDP increase of about 1-1.5 percentage points over a EU programing period (7 years). On the other hand, Accetturo et al (2014), using the same empirical framework, show that transfers might have unintended consequences on the local endowments of social capital and cooperation.…”

The future of regional policy

“…The empirical evidence for such a policy trade-off, however, is rather mixed at best (Martin, 2008;Gardiner, Martin and Tyler, 2011). Moreover, the most recent econometric evidence from the EU (Becker et al 2010(Becker et al , 2012Pellegrini et al 2013), the UK (Criscuolo et al 2012) and the USA (Greenstone and Moretti 2008;Kline and Moretti 2012) suggest that local and regional development policies generally have positive impacts with little or no evidence for any crowding out effects. Thirdly, those (typically econometric) analyses that claim to demonstrate that if human capital, that is people based, characteristics (such as education, skill, entrepreneurship, etc), are allowed for, place-based policies are found to have no significant impact on local growth outcomes, fail to appreciate that what are people-based characteristics are often inextricably linked to place.…”

Economic convergence in ageing Europe

“…In practice, this aim manifests itself in the attempts to reduce regional disparities in economic development through the Regional Cohesion Program. Since the beginning of the EU Cohesion Policy in the late 1980s, the program has allocated increasingly large funding, and the results of the implemented measures are claimed to be quite successful (Cappelen et al, 2003;Leonardi, 2006;Pellegrini et al, 2013). Particularly, the "success story" could be heard in the context of Eastern-European regions catching up with the advantageous regions of the older EU states (Bosker, 2009).…”