Under What Conditions Do Structural Funds Play a Significant Role in European Regional Economic Growth? Some Evidence from Recent Panel Data

Abstract

Strengthening economic, social and territorial cohesion is a central objective of the European Union. However, disparities among European regions are considerable, and there are doubts if they are likely to reduce. In recent years there has been an increasing literature examining the effectiveness of the European Union's funds for promoting growth and reducing asymmetries between Members. In this article we contribute to the literature by examining under which conditions European Union financial aid may be affecting regional growth. Doing so, we explore the interactions between transfers and income and other regional characteristics, such as human capital or innovation. The study is applied to a panel of 137 European regions, covering the period 1995-2009. The conclusions suggest a positive and significant marginal impact of Funds only in regions with low levels of human capital and innovation.

Mediating Effects of Cohesion Policy and Institutional Quality on Convergence between EU Regions: An Examination Based on a Conditional Beta-Convergence Model with a 3-Way Multiplicative Term

“…There are some studies [7,8,13,26] that interact the initial level of development with the CP variable, allowing for a coefficient of the conditional beta-convergence, i.e., β, to vary depending on the intensity of the cohesion payments or the Objective 1 treatment. Nevertheless, research uses this specification to model how the level of development (and conditions that are related to it) affects the growth outcomes of the intensity of the CP payments or the Objective 1 treatment.…”

“…The EU allocates over 30% of the overall budget to achieve the goals of the CP. The studies that examined the effectiveness of the CP over the last two programming periods considered various outcomes of this policy: employment [1][2][3], productivity [4][5][6], but mostly economic growth ( [3,[6][7][8][9][10][11][12], etc. ), even though convergence is the ultimate goal of the CP.…”

“…Some specifications interact the CP variable with factors that are considered as the mediating growth outcomes of the CP. Research that interacts CP with the initial level of development [7,8,13,26] uses this multiplicative term to examine how the level of development mediates the effect that CP has on growth. Surprisingly no research interprets this multiplicative term in a way to examine how CP mediates the relationship between the initial level of development and growth, i.e., regional convergence.…”

“…Furthermore, no research interacts CP, the initial level of development, and institutional quality to examine the mediating effects of the CP, institutional quality, and their interaction on convergence. Moreover, research that uses model specifications with the interaction term between interval/ratio variables rarely (except for [8,18]) recognises that the estimated marginal effect (the slope coefficient), as well as its significance, is conditional, i.e., it depends on the value of the mediating factor. It means there could be a range of values for the mediating factor over which the estimated marginal effect of the CP is positive and the range over which this effect is negative.…”

Did the Governance of EU Funds Help Italian Regional Labour Markets during the Great Recession?

“…Despite the mixed results in the literature, resulting from conditional positive impact several factors such as the unit and time of observation, the empirical strategy and the particular funds analysed, there has been progressive agreement on the conditional positive impact of the cohesion policy on regional growth and development (Becker et al ., ; Szopik‐Depczyńska et al ., ). Some of the existing works have applied cross‐section and panel techniques to regional growth regressions where the dependent variable is the growth of GDP per capita and/or employment and the main explanatory variable is eligibility for and/or the amount of cohesion funds (Pinho et al ., , ). More recent contributions have used regression discontinuity design and synthetic control methods to provide robust evidence of the effectiveness of the cohesion policy (Becker et al ., ; Di Cataldo, ; Pellegrini et al ., ).…”