Catching up?: A study on the effects of the European Union's regional policy during 2000-2006

Abstract: Regional policy is in monetary terms the second largest priority area of the EU, currently representing 37 percent of the annual budget. Our work shows that the policy measures and huge resource allocations are based mainly on political considerations, rather than critical analysis of effects and efficiency. The objective of the regional policy is to enhance cohesion for the member countries, both at the national and regional level. Based on a panel dataset for the period 1998-2008 with statistics on GDP and unemployment levels, we have analyzed the impacts and effects of the regional policy in terms of growth and cohesion. We have also analyzed cohesion and growth on an aggregated country level, to put regional development into a broader context, both politically and economically. Our main findings are that regions have experienced positive effects in terms of economic growth and decreasing unemployment levels after having received regional support. However, we cannot find any significant support for domestic cohesion. Regional differences tend to endure while countries converge.