The Impact of Structural Funds on Regional Growth: A Panel Data Spatial Analysis

Abstract

AbstractThe European Union is one of the most prosperous areas of the world. However, huge disparities remain among its member states and regions. Given the persistence of those large regional inequalities, it is pertinent to analyse the efficiency of structural funds. In light of the neoclassical theory, these funds should contribute to improving the economic efficiency among the poorest regions, promoting regional convergence. However, the new economic geography states that structural funds may also facilitate the geographic concentration of economic activities, thus perpetuating regional imbalances. This article measures the impact of structural funds on regional convergence using a spatial econometric approach applied to an extended sample of European regions across a long time interval. Based on data for 96 EU regions during the period 1995–2009, a Durbin model with panel data is estimated in order to capture the effects of spatial dependence in both the lagged dependent variable and the independent variables. The results confirm the existence of conditional convergence and the importance of neighbourhood and spillover effects but do not detect the existence of positive impacts from structural funds.