Does Financial Support from ERDF and CF Contribute to Convergence in the EU? Empirical Evidence at NUTS 3 Level

Abstract

Analysing papers that reveal by decomposing territorial inequalities in the EU that the share of disparities attributed to the NUTS 3 level has increased over the last 20 years, this paper aims to examine to what extent the financial support in 2000-2006 from ERDF and CF, which are the main regional policy tools but mainly are directed to address the issues arising at the NUTS 2 level, contributed to supporting convergence at the NUTS 3 level. Our re-search strategy relies on combining a conditional β-convergence model and a difference-in-differences (DiD) estimator. Estimations are generated for four alternative post-policy periods, two ways to measure policy intervention and for different funds as well as different expenditure categories. Our research results bring to light the question of potential negative outcomes of the EU's existing regional policy since the policy that is focused on the NUTS 2 level is enlarging imbalances within these regions, i.e., among NUTS 3 regions.