Effects of EU rural development funds on newly established enterprises in Romania's rural areas

Abstract

ABSTRACT This study estimates the causal effects of EU Rural Development funds for micro-enterprises and tourism activities on the number of newly established enterprises in the treated rural communities of Romania (programme period 2007–2013). Using a combined database from several sources at the local administrative unit (LAU2) level, both the average treatment effects and average treatment intensity effects are analysed based on Propensity score matching and Dose response treatment models. Controlled variables include institutional factors, and urban–rural as well as farm–non-farm spill-over effects. The analysis showed that on average funds did not contribute to the creation of new enterprises in Romanian rural communities in the period 2009–2014. By matching for covariates no differences were found between supported and unsupported communities regarding new enterprise creation. However, evidence was found that the higher the treatment intensity, the higher the number of newly established enterprises. Furthermore, the results showed that funds higher than €50 per inhabitant significantly contributed to the creation of new enterprises in rural areas.