Too much of a good thing? On the growth effects of the EU's regional policy

Sascha O. Becker, Peter H. Egger, Maximilian Von Ehrlich

Research output: Contribution to journalArticleResearchpeer-review

79 Citations (Scopus)

Abstract

The European Union (EU) provides grants to disadvantaged regions of member states from two pools, the Structural Funds and the Cohesion Fund. The main goal of the associated transfers is to facilitate convergence of poor regions (in terms of per-capita income) to the EU average. We use data at the NUTS3 level from the last two EU budgetary periods (1994-1999 and 2000-2006) and generalized propensity score estimation to analyze to which extent the goal of fostering growth in the target regions was achieved with the funds provided and whether or not more transfers generated stronger growth effects. We find that, overall, EU transfers enable faster growth in the recipient regions as intended, but we estimate that in 36% of the recipient regions the transfer intensity exceeds the aggregate efficiency maximizing level and in 18% of the regions a reduction of transfers would not even reduce their growth. We conclude that some reallocation of the funds across target regions would lead to higher aggregate growth in the EU and could generate even faster convergence than the current scheme does.

Original languageEnglish
Pages (from-to)648-668
Number of pages21
JournalEuropean Economic Review
Volume56
Issue number4
DOIs
Publication statusPublished - May 2012
Externally publishedYes

Keywords

  • EU regional policy
  • Generalized propensity score estimation
  • Quasi-randomized experiment
  • Regional growth

Cite this

Becker, Sascha O. ; Egger, Peter H. ; Von Ehrlich, Maximilian. / Too much of a good thing? On the growth effects of the EU's regional policy. In: European Economic Review. 2012 ; Vol. 56, No. 4. pp. 648-668.
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Too much of a good thing? On the growth effects of the EU's regional policy. / Becker, Sascha O.; Egger, Peter H.; Von Ehrlich, Maximilian.

In: European Economic Review, Vol. 56, No. 4, 05.2012, p. 648-668.

Research output: Contribution to journalArticleResearchpeer-review

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