Are the marginal convergence outcomes of the Cohesion Policy diminishing?
Abstract
Significant disparities still exist between regions of the European Union, even though substantial Cohesion investments are directed to address this issue. To adjust the Cohesion Policy (CP), researchers assess the returns of the CP, but almost all studies are carried out at NUTS1&2 or a country level, even though significant disparities occur at NUTS3 level. Moreover, just a few studies examine the non-linear effects of the CP, and none of them covers the NUTS3 disaggregation level. Filling the gap of previous contributions, the paper aims to investigate convergence outcomes of the CP at NUTS2&3 level and to identify whether the marginal effect of the CP is diminishing. The estimation strategy is based on the modified specification of the difference-in-differences estimator that has an advantage while examining policy effects, using non-experimental data. Based on research findings, the essential guidelines for the improvement of the CP can be drawn up: i) the distribution policy of Cohesion investments should focus on smaller territorial units to reduce disparities at NUTS3 level; ii) the intensity of the CP’s transfers has to be optimised because excessive intensity does not provide a positive return.
Keyword : Cohesion Policy, Cohesion investments, regional disparities, convergence, diminishing return, NUTS2, NUTS3
How to Cite
Butkus, M. ., Mačiulytė-Šniukienė, A. ., & Matuzevičiūtė, K. . (2020). Are the marginal convergence outcomes of the Cohesion Policy diminishing?. Journal of Business Economics and Management, 21(5), 1390-1410. https://doi.org/10.3846/jbem.2020.13170
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Cerqua, A., & Pellegrini, G. (2018). Are we spending too much to grow? The case of Structural Funds. Journal of Regional Science, 58, 535–563. https://doi.org/10.1111/jors.12365
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Gagliardi, L., & Percoco, M. (2017). The impact of European Cohesion Policy in urban and rural regions. Regional Studies, 51(6), 857–868. https://doi.org/10.1080/00343404.2016.1179384
Gorzelak, G. (2016). Cohesion Policy and regional development. In J. Bachtler, P. Berkowitz, S. Hardy, & T. Muravska (Eds.), 33EU Cohesion Policy – Reassessing performance and direction. Routledge.
Kyriacou, A. P., & Roca-Sagales, O. (2012). The impact of EU structural funds on regional disparities within member states. Environment and Planning C: Politics and Space, 30(2), 267–281. https://doi.org.10.1068/c11140r
Marzinotto, B. (2012). The growth effects of EU cohesion policy: A meta-analysis (Bruegel working paper No. 2012/14). Bruegel, Brussels. https://www.econstor.eu/bitstream/10419/78011/1/728570688.pdf
Maynou, L., Saez, M., Kyriacou, A., & Bacaria, J. (2016). The impact of structural and Cohesion Funds on Eurozone convergence, 1990–2010. Regional Studies, 50(7), 1127–1139. https://doi.org/10.1080/00343404.2014.965137
Mohl, P., & Hagen, T. (2008). Does EU cohesion policy promote growth? Evidence from regional data and alternative econometric approaches (ZEW Discussion Paper 08-086). https://doi.org/10.2139/ssrn.1298935
Pellegrini, G., & Cerqua, A. (2016, October 20–22). Measuring the impact of intensity of treatment using RDD and covariates: The case of Structural Funds [Conference presentation]. 57th RSA Annual Conference, Bocconi University, Milan, Italy.
Pellegrini, G., Terribile, F., Tarola, O., Muccigrosso, T., & Busillo, F. (2013). Measuring the effects of European Regional Policy on economic growth: A regression discontinuity approach. Papers in Regional Science, 92(1), 217–233. https://doi.org/10.1111/j.1435-5957.2012.00459.x
Piętak, L. (2018). Did structural funds affect economic growth and convergence across regions? Spanish case in the years 1989–2016 (INE PAN Working Paper Series, No. 44). http://inepan.pl/wp-content/uploads/2016/07/working-papers-44-Hiszpania-Pietak.pdf
Pinho, C., Varum, C., & Antunes, M. (2015a). Structural funds and European regional growth: Comparison of effects among different programming periods. European Planning Studies, 23(7), 1302–1326. https://doi.org/10.1080/09654313.2014.928674
Pinho, C., Varum, C., & Antunes, M. (2015b). Under what conditions do structural funds play a significant role in European regional economic growth? Some evidence from recent panel data. Journal of Economic Issues, 49(3), 749–771. https://doi.org/10.1080/00213624.2015.1072382
Pontarollo, N. (2017). Does Cohesion Policy affect regional growth? New evidence from a semi-parametric approach. In J. Bachtler, P. Berkowitz, S. Hardy, & T. Muravska (Eds.), EU cohesion policy (pp. 93–108). Routledge.
Rodríguez-Pose, A., & Garcilazo, E. (2015). Quality of government and the returns of investment: Examining the impact of Cohesion expenditure in European Regions. Regional Studies, 49, 1274–1290. https://doi.org/10.1080/00343404.2015.1007933
SWECO. (2008). Final Report – ERDF and CF Regional Expenditure Contract No. 2007.CE.16.0.AT.036. https://ec.europa.eu/regional_policy/sources/docgener/evaluation/pdf/expost2006/expenditure_final.pdf
Szitásiová, V., Martišková, M., & Šipikal, M. (2014). Substitution effect of public support programs at local level. Transylvanian Review of Administrative Sciences, 10(SI), 167–182.
Wallace, H. S., Pollack, M. A., & Young, A. R. (2010). Policy-making in the European Union. Oxford University Press.
Wostner, P., & Šlander, S. (2009). The effectiveness of EU cohesion policy revisited: Are EU funds really additional? (European Policy Research Paper No. 69). European Policies Research Centre.
Barca, F. (2009). An agenda for a reformed cohesion policy: A place-based approach to meeting European Union challenges and expectations. http://www.europarl.europa.eu/meetdocs/2009_2014/documents/regi/dv/barca_report_/barca_report_en.pdf
Becker, S. O. (2012). EU structural funds: Do they generate more growth? (The CAGE-Chatham House, Series No. 3, December 2012). Chatham House.
Becker, S. O., Egger, P. H., & von Ehrlich, M. (2018). Effects of EU regional policy: 1989–2013. Regional Science and Urban Economics, 69, 143–152. https://doi.org/10.1016/j.regsciurbeco.2017.12.001
Becker, S. O., Egger, P., & von Ehrlich, M. (2012). Too much of a good thing? On the growth effects of the EU’s regional policy. European Economic Review, 56, 648–668. https://doi.org./10.1016/j.euroecorev.2012.03.001
Becker, S. O., Egger, P., & von Ehrlich, M. (2015). Regional policy. In H. Badinger, & V. Nitsch (Eds.), Handbook of the economics of European integration (Chapter 17). Routledge.
Berkowitz, P., Monfort, P., & Pieńkowski, J. (2020). Unpacking the growth impacts of European Union Cohesion Policy: Transmission channels from Cohesion Policy into economic growth. Regional Studies, 54(1), 60–71. https://doi.org/10.1080/00343404.2019.1570491
Beugelsdijk, M. S, & Eijffinger, S. C. W. (2005). The effectiveness of structural policy in the European Union: An empirical analysis for the EU-15 in 1995–2001. Journal of Common Market Studies, 43, 37–51. https://doi.org/10.1111/j.0021-9886.2005.00545.x
Bourdin, S. (2019). Does the cohesion policy have the same influence on growth everywhere? A geographically weighted regression approach in Central and Eastern Europe. Economic Geography, 95(3), 256–287. https://doi.org/10.1080/00130095.2018.1526074
Butkus, M., Mačiulytė-Šniukienė, A., Matuzevičiūtė, K., & Cibulskienė, D. (2019). What is the return on investing European regional development and Cohesion funds? Difference-in-differences estimator approach. Ekonomický časopis, 67(6), 647–676.
Cerqua, A., & Pellegrini, G. (2018). Are we spending too much to grow? The case of Structural Funds. Journal of Regional Science, 58, 535–563. https://doi.org/10.1111/jors.12365
Cibulskiene, D., & Butkus, M. (2007). The influence of cumulative causation process on regional divergence in Lithuania during 1995–2003. Jahrbuch fur Regionalwissenschaft, 27(1), 59–87. https://doi.org/10.1007/s10037-006-0011-2
Ciffolilli, A., Condello, S., Pompili, M., & Roemish, R. (2015). Geography of Expenditure. Final Report. Work Package 13. Ex post evaluation of Cohesion Policy programmes 2007–2013, focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF). https://ec.europa.eu/regional_policy/sources/docgener/evaluation/pdf/expost2013/wp13_final_report_en.pdf
Crescenzi, R., & Giua, M. (2020). One or many Cohesion Policies of the European Union? On the differential economic impacts of Cohesion Policy across member states. Regional Studies, 54(1), 10–20. https://doi.org/10.1080/00343404.2019.1665174
Del Bo, C., Florio, M., Sirtori, E., & Vignetti, S. (2016). Additionality and regional development: Are EU Structural Funds complements or substitutes of national Public Finance? https://doi.org/10.2139/ssrn.2723402
Di Cataldo, M. (2017). The impact of EU Objective 1 funds on regional development: Evidence from the UK and the prospect of Brexit. Journal of Regional Science, 57(5), 814–839. https://doi.org/10.1111/jors.12337
Di Cataldo, M., & Monastiriotis, V. (2020). Regional needs, regional targeting and regional growth: an assessment of EU Cohesion Policy in UK regions. Regional Studies, 54(1), 35–47. https://doi.org/10.1080/00343404.2018.1498073
Eberle, J., & Brenner, T. (2016). More bucks, more growth, more justice? The effects of regional structural funds on regional economic growth and convergence in Germany (Working Papers on Innovation and Space, 01.16). Philipps University Marburg, Department of Geography, Marburg. Retrieved October 26, 2018, from http://hdl.handle.net/10419/147971
Ederveen, S., Gorter, J., de Mooij, R., & Nahuis, R. (2003). Funds and Games: The Economics of European Cohesion Policy (Occasional Papers 03). European Network of Economic Policy Research Institutes. http://aei.pitt.edu/1965/
European Commission. (2016). Measuring the impact of Structural and Cohesion Funds using regression discontinuity design in EU27 in the period 1994–2011, Ex post evaluation of Cohesion Policy programmes 2007–2013, focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) (Final technical Report, Work Package 14c – Tasks 2 and 3).
Gagliardi, L., & Percoco, M. (2017). The impact of European Cohesion Policy in urban and rural regions. Regional Studies, 51(6), 857–868. https://doi.org/10.1080/00343404.2016.1179384
Gorzelak, G. (2016). Cohesion Policy and regional development. In J. Bachtler, P. Berkowitz, S. Hardy, & T. Muravska (Eds.), 33EU Cohesion Policy – Reassessing performance and direction. Routledge.
Kyriacou, A. P., & Roca-Sagales, O. (2012). The impact of EU structural funds on regional disparities within member states. Environment and Planning C: Politics and Space, 30(2), 267–281. https://doi.org.10.1068/c11140r
Marzinotto, B. (2012). The growth effects of EU cohesion policy: A meta-analysis (Bruegel working paper No. 2012/14). Bruegel, Brussels. https://www.econstor.eu/bitstream/10419/78011/1/728570688.pdf
Maynou, L., Saez, M., Kyriacou, A., & Bacaria, J. (2016). The impact of structural and Cohesion Funds on Eurozone convergence, 1990–2010. Regional Studies, 50(7), 1127–1139. https://doi.org/10.1080/00343404.2014.965137
Mohl, P., & Hagen, T. (2008). Does EU cohesion policy promote growth? Evidence from regional data and alternative econometric approaches (ZEW Discussion Paper 08-086). https://doi.org/10.2139/ssrn.1298935
Pellegrini, G., & Cerqua, A. (2016, October 20–22). Measuring the impact of intensity of treatment using RDD and covariates: The case of Structural Funds [Conference presentation]. 57th RSA Annual Conference, Bocconi University, Milan, Italy.
Pellegrini, G., Terribile, F., Tarola, O., Muccigrosso, T., & Busillo, F. (2013). Measuring the effects of European Regional Policy on economic growth: A regression discontinuity approach. Papers in Regional Science, 92(1), 217–233. https://doi.org/10.1111/j.1435-5957.2012.00459.x
Piętak, L. (2018). Did structural funds affect economic growth and convergence across regions? Spanish case in the years 1989–2016 (INE PAN Working Paper Series, No. 44). http://inepan.pl/wp-content/uploads/2016/07/working-papers-44-Hiszpania-Pietak.pdf
Pinho, C., Varum, C., & Antunes, M. (2015a). Structural funds and European regional growth: Comparison of effects among different programming periods. European Planning Studies, 23(7), 1302–1326. https://doi.org/10.1080/09654313.2014.928674
Pinho, C., Varum, C., & Antunes, M. (2015b). Under what conditions do structural funds play a significant role in European regional economic growth? Some evidence from recent panel data. Journal of Economic Issues, 49(3), 749–771. https://doi.org/10.1080/00213624.2015.1072382
Pontarollo, N. (2017). Does Cohesion Policy affect regional growth? New evidence from a semi-parametric approach. In J. Bachtler, P. Berkowitz, S. Hardy, & T. Muravska (Eds.), EU cohesion policy (pp. 93–108). Routledge.
Rodríguez-Pose, A., & Garcilazo, E. (2015). Quality of government and the returns of investment: Examining the impact of Cohesion expenditure in European Regions. Regional Studies, 49, 1274–1290. https://doi.org/10.1080/00343404.2015.1007933
SWECO. (2008). Final Report – ERDF and CF Regional Expenditure Contract No. 2007.CE.16.0.AT.036. https://ec.europa.eu/regional_policy/sources/docgener/evaluation/pdf/expost2006/expenditure_final.pdf
Szitásiová, V., Martišková, M., & Šipikal, M. (2014). Substitution effect of public support programs at local level. Transylvanian Review of Administrative Sciences, 10(SI), 167–182.
Wallace, H. S., Pollack, M. A., & Young, A. R. (2010). Policy-making in the European Union. Oxford University Press.
Wostner, P., & Šlander, S. (2009). The effectiveness of EU cohesion policy revisited: Are EU funds really additional? (European Policy Research Paper No. 69). European Policies Research Centre.