Heterogeneous growth outcomes of the EU’s regional financial support mediated by institutions with some empirical evidences at NUTS 3 level

Abstract

Assessing the return of the EU’s regional financial support, the research examines whether financial support promotes economic growth, increases labour productivity, and creates new jobs. Since 2000, these issues have been widely discussed in scientific studies aiming to ascertain if the cost of regional policy is justified, and whether the return on Structural Funds (SF) investments is positive. However, scientific studies mainly test the proposed evaluation models at NUTS 2 or at country level. Moreover, previous contributions in this field mostly model homogeneous effects of SF payments across regions in the EU, encouraging research on the conditioning factors that can foster or hinder effects of the support. In the light of these facts, this article aims to discuss a model that would supplement scientific literature by assessing the return of the EU’s regional financial support capturing heterogeneous effects of SF payments on regional growth. Empirical application is based on NUTS 3 level data over 2000–2006 programming period and estimation of the heterogeneous SF payment effects on the dynamics of per capita GDP growth. Estimations provide an evidence that EU’s regional financial support enhances growth and that significance and size of the positive effect are highly conditioned by institutional quality of the supported region.