Pushing for growth: Quasi-experimental evidence on the effect of regional transfers in the EU

University essay from Lunds universitet/Nationalekonomiska institutionen

Abstract: This thesis investigates the effect of Objective-1 regional transfers on the per-capita income growth performance of EU NUTS-3 regions during the budgetary period 2000-2006. To be able to distinguish a causal effect and account for possible endogeneity a quasi-experimental regression-discontinuity design is employed. This strategy relies on the arbitrary set 75%-rule for Objective-1 fund eligibility. The findings generally suggest a positive effect of the funds to promote growth in low-income regions. However, the country affiliation of recipient regions seems to be of great importance to the effectiveness of the funds in promoting growth. Moreover, evidence point to the transfers affecting different regions in different ways. Regions just below the threshold and some regions in older member states seem better at utilizing received funds. This thesis suggests that a regions absorptive capacity is closely linked to the institutional environment.

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