EIB urban loans, metropolitan growth and governance: a quantitative evaluation

Abstract

ABSTRACTThis paper investigates the growth impact of the European Investment Bank’s (EIB) urban loans on metropolitan regions, and whether the observed change is related to the quality of government during the period 2000–10. The approach (Solow growth model) is based on the methods used in the Cohesion Policy assessment literature. The panel data used combine EUROSTAT metropolitan regions and NUTS-2 data with a database on EIB loans from 2000 to 2010. This EIB loans database has never previously been used for ex-post evaluations. To ensure the robustness of the statistical approach, we adjust our standard errors for heteroscedasticity and serial and spatial correlation and control for endogeneity, as well as for spatial spillovers. We find EIB urban lending has a positive and significant impact on growth across most of the estimations. When running the baseline estimations on subsamples and including a variable on the quality of government, EIB urban loans are found to have a negative impact on growth in new member countries and in places with lower quality regional governance. Conversely, having strong institutions seems to further enhance the ability of EIB loans to have a positive impact on growth.