The Effect of EU Funding on Income Inequality and Employment

Abstract: An outspoken goal of the European Union is to decrease differences between member states and promote cohesion. To achieve this, the European Union provides funding to the regions with greatest development needs. However, during the last decades, the within-country income inequality level has risen in the European Union. Earlier studies have mainly focused on measuring the effect of the funding on economic growth and have overlooked other important aspects. Therefore, this paper sets out to examine the effect of the funding on income inequality and employment levels within the NUTS 2 regions of the European Union. This was carried out by using a fuzzy regression discontinuity design, which exploits the scheme of the funding programme. No statistically significant results were found, which questions the efficiency of the funding.