Structural Funds and European Regional Growth: Comparison of Effects among Different Programming Periods

Strengthening social, economic and territorial cohesion is a central objective of the European Union (EU) and the Structural Funds reflect the main financial effort of the EU to pursue this goal. So far we have gone through four programming periods; to what extent the EU Funds have become more effective in promoting growth and reducing the disparities between EU Member countries is a matter of concern. We investigate the existence (or not) of learning effects and efficiency improvements following the reforms of Regional Policy. The study is applied to data from EU regions (EU12) in the most recent programming periods where data are available. The results suggest an improvement of the Funds efficiency in growth in 2000–2006 when compared to the previous programming period. Moreover, the returns from investments of Funds tend to be higher in richer, higher-educated and more innovative regions. Finally, the Cohesion group has not been able to transform the large transfers received into additional growth.     

An Impact Analysis of the European Structural Funds on the Variation of the Rate of Employment and Productivity in Objective 1 Regions

Regional policies seek to enable regions to increase their competitiveness and development, and as such one priority objective of activities financed by Structural Funds is higher employment, higher productivity and economic activity. How efficiently the regions apply the funds is a fundamental issue for the development and continuity of regional policies. We, therefore, consider that determining the efficiency of European regional policies is an issue of high importance, and this is the main aim of this study. We have considered it appropriate to use the available information to apply a mathematical technique known as data envelopment analysis, which allows us to calculate the technical efficiency and inefficiency of the Structural Funds applied in the Objective 1 regions for the period 2000–2006. Furthermore, we wish to determine if the regions have been more efficient in increasing their levels of employment or in increasing productivity. Our study applies this methodology along with other methods such as regression analysis, profit analysis and factorial analysis to determine the variation in the rate of unemployment and productivity in these European Regions. The study reveals that only eight regions are efficient, although none of them is in all the models run.     

An Impact Analysis of the European Structural Funds on the Variation of the Rate of Employment and Productivity in Objective 1 Regions

Regional policies seek to enable regions to increase their competitiveness and development, and as such one priority Objective of activities financed by Structural Funds is higher employment, higher productivity and economic activity. How efficiently the regions apply the funds is a fundamental issue for the development and continuity of regional policies. We therefore consider that determining the efficiency of European regional policies is an issue of high importance, and this is the main aim of this study. We have considered it appropriate to use the available information to apply a mathematical technique known as Data Envelopment Analysis (DEA), which allows us to calculate the technical efficiency and inefficiency of the Structural Funds applied in the Objective 1 regions for the period 2000–2006. Furthermore, we wish to determine if the regions have been more efficient in creasing their levels of employment or in increasing productivity. Our study applies this methodology along with other methods like regression analysis, profit analysis and factorial analysis to determine the variation in the rate of unemployment and productivity in these European Regions. The study reveals that only eight regions are efficient, although none of them is run in all the models.     

Are we spending too much to grow? The case of Structural Funds

We evaluate whether the impact of EU Structural and Cohesion Funds (EUF) on Member States’ regional economic growth depends on the intensity of treatment, measured by the normalized amount of funds distributed in each region. We use an original data set that covers all the main sources of EUF and extend the regression discontinuity design to the case of continuous treatment. The results suggest an average positive effect on regional growth. The estimated conditional intensity‐growth function is concave and presents a maximum value. Therefore, the exceeding funds could have been allocated to other lagging regions without reducing the effect on growth.     

The Structural Funds in Andalusia for the Programming Period 2014–2020: Time for Tightening Belts

During the period 2014–2020 it will be the first time since Spain joined the European Economic Community that the Southern region of Andalusia will not be considered as one of the Objective 1 priority areas for the European Regional Policy. This paper analyses the economic impact of the foreseeable withdrawal of an important amount of European Structural Funds in the region. Our point is to develop a dynamic general equilibrium model to assess, under different simulation scenarios, the effects of the removal of this funding on the main regional economic indicators, specially focusing on GDP growth, a key variable for the future of the region.     

Assessing Territorial Impacts of the EU Cohesion Policy: The Portuguese Case

This article examines the territorial impacts of the EU Cohesion Policy in Portugal, between 1990 and 2010, at the national level. To reach some conclusions, after a brief overview of the existing literature on territorial impact assessment (TIA) procedures, we present the main features of a proposed TIA technique, which we called TARGET_TIA, and applied to our study case. This analysis permitted us to go beyond the general scope of the EU Cohesion Policy evaluations, which concentrate mainly on the socioeconomic and environmental dimensions, by placing on evidence other key-territorial dimensions, such as Territorial Governance/Cooperation and Polycentricity. Findings indicate that, in general, the EU Cohesion Policy had positive territorial impacts in Portugal, namely by supporting the construction of absent and necessary physical infrastructures. However, the lack of spatial planning and strategic vision limited a more effective and efficient use of Cohesion Funds in Portugal.     

Does EU cohesion policy work? Theory and evidence

This paper evaluates the effectiveness of European Cohesion Policy in the regions of 12 EU countries in the period 1991–2008, on the basis of a spatial growth model, which allows for the identification of both direct and indirect effects of EU funds on GDP per worker growth. We find that “Objective 1” funds are characterized by strong spatial externalities and a positive and concave effect on the growth of GDP per worker, which reaches a peak at the ratio funds/GDP of approximately 3 percent and becomes non‐significant after 4 percent. “Objective 2” and “Cohesion” funds have nonsignificant effects, while all the other funds exert a positive and significant effect, but their size is very limited. EU Cohesion Policy, moreover, appears to have increased its effectiveness over time. In the period 2000–2006 Objective 1 funds are estimated to have a median multiplier equal to 1.52, and to have added 0.37 percent to the GDP per worker growth. Overall, in the period 1991–2008, funds are estimated to have added 1.4 percent to the median annual growth, and to have reduced regional disparities of 8 basis points in terms of the Gini index.     

Gaining in impacts by leveraging the policy mix: Evidence from the European Cohesion Policy in more developed regions

This paper investigates how the overall impact of the European Cohesion Policy depends on the composition of the regional investment in Hard (infrastructure) and Soft (business and technical support) projects. The study employs a generalized propensity score (GPS) analysis in a multidimensional treatment context. In particular, the two dimensions considered are given by the Hard and Soft investments. The GPS estimation is based on a set of relevant idiosyncratic features of the regions. The second step estimates a dose–response function in a two-dimensional setting. The results confirm the existence of nonlinearities in the effect of different amounts of funds, but more importantly, show a degree of complementarity between Hard and Soft investment and that for policymakers, it is crucial to exploit such features to achieve more significant impact. The EU's more developed regions could have achieved a doubled GDP p.c. growth rate by pursuing a policy mix where Hard investments are reduced in favor of Soft investments. This improvement is comparable to the one obtained by at least doubling the available resources. The findings add to the evidence collected on the impact of the Cohesion Policy, suggesting a shift of the debate from the quantity to the quality of the expenditure pursued under the umbrella of territorial policies.     

Determinants of the Uneven Regional Participation of Firms in European Technology Programmes. The 'Low R&D Trap'

Technology is of key importance to the growth of regional firms and economies. Research has shown the association between low technology development or take-up and regional disparities. Hence technology policy is moving closer to the heart of regional policies. European innovation programmes are intended to involve firms, large and small, in international technology research and development networks. The paper focuses on the involvement of Spanish firms in such programmes. Participation tends to be low if business R&D, presence of large firms, and the development of regional innovation systems are also low. Creation of R&D infrastructure through the Structural Funds has now to be prioritized at EU level and also define a new scheme of sectoral priorities in order to support R&D innovation activities in fields diverse from high-tech, if regions are to escape the 'low R&D trap'.     

Modelling European Regional Policy 2007–2013: Applied General Equilibrium Analysis of the Economic Impact on the Madrid Region

The main purpose of this study was to present an applied general equilibrium model to the economy of the Madrid region. The model developed is considered a neoclassical version of the Walrasian equilibrium, modelling production sectors on perfect competition, full use of production factors and the clearing of all markets of goods. The model thus enables the second objective of the study: to estimate the impact of the 2007–2013 Structural Funds received on the economy of the Madrid region. The effects resulting from the injection of the funds are quantified by simulations performed using the developed model. This analysis of the quantification of effects is extremely important, as the priority objectives of the European Regional Policy have changed with respect to the previous period. In the current operational programme, the Madrid region comes under the regional competitiveness objective, which focuses on the priorities of innovation, research, the information society and business development. The sectors that have traditionally benefited, mainly infrastructure, therefore give way to others and the injection of funds into the Madrid economy is to be through other areas. In addition, there has been a reduction of the European aid received by our Region, as compared with previous Programmes.     

The impact of EU Objective 1 funds on regional development: Evidence from the U.K. and the prospect of Brexit

Brexit means that regions of the United Kingdom will lose access to the EU Cohesion Policy. Have EU funds been effective, and what might be the consequences of an interruption of EU financial support? This paper studies the impact of “Objective 1” funding—the highest form of EU aid—in Cornwall and South Yorkshire, two of the U.K.’s most subsidized regions. Counterfactual methodologies assessing their labor market and economic performance provide evidence of a positive effect of EU Objective 1 funds. When in 2006 South Yorkshire lost Objective 1 eligibility, this massively reduced its share of EU funds and the region was unable to sustain the gains obtained in previous years. This suggests that while Structural Funds may be effectively improving socio‐economic conditions of poorer regions, the performance of subsidized areas could be deeply affected by a reduction (or worse, an interruption) of EU aid.     

Analysing How Environmental Concerns are Integrated in the Design of the EU Structural Funds Programmes

This paper analyses the environmental measures co-financed by the European Union (EU) Structural Funds in the less-developed regions. Specifically, it studies if these environmental measures are tailored to the specific needs of the different regions and whether they are driven by an ecological modernization approach. The inclusion of environmental goals into the regional policy is also tested by analysing its connection with the main European environmental directives. We find a suitability of the regional programmes to the regional specific environmental factors, a scarce presence of the ecological modernization paradigm behind the programmes implementation and a clear orientation of the regional programmes to meet the EU legislation.     

Polycentricity – one concept or many?

This paper aims to discuss polycentrism and its implications. Polycentricity plays a key role in EU Cohesion Policy and has done so since 1999 when the notion was included in the European Spatial Development Perspective. Politically, it emerged as a key tool because of its ability to fuse together the two primary and conflicting perceptions of spatial–economic development, cohesion and competitiveness. No agreed definition of polycentricity exists. Furthermore, different actors and disciplines define polycentrism differently. The absence of a concise and coherent definition makes it difficult to measure polycentricity. Moreover, several studies have concluded that it is difficult to identify empirical evidence to support the positive claims made in its name. Polycentrism is assumed toolbox to reduce regional disparities, but polycentric countries display higher regional disparities than monocentric countries. Polycentric countries do not perform better than monocentric countries with regard to competitiveness and GDP/cap. As such, this paper concludes that not only does the political meaning of polycentricity struggle over aims with the inherit dichotomy at its heart, it also struggles in terms of basic credibility.     

Evaluating the governance of structural funds programmes: The case of community economic development in South Yorkshire

Methods for evaluating regional and urban policies have become increasingly sophisticated in recent years. However, this paper argues that the evaluation of Structural Funds programmes has systematically underplayed the effect of governance on both programme design and implementation. This paper uses the role of voluntary and community sector organizations in promoting community economic development initiatives within the European Union's Structural Funds programmes in South Yorkshire as a case study. An argument is made for extending evaluation methods, especially theory-based evaluation, through using multi-level governance as a “theory of change”. A key finding is that to explain how programmes work, evaluators need to consider formal partnership and management arrangements, their traditional focus, but also wider governance structures and the importance of informal policy networks. Such a focus allows for a consideration of issues such as resource mobilization and power.     

Regional Inequality in the EU: How to Finance Greater Cohesion

After outlining the overall scale and evolution of European Union (EU) public expenditure, this paper examines the mechanisms driving the allocation of Cohesion Policy resources. The analysis reveals the extent to which the outcome of the policy's principle- and formula-driven allocation mechanisms is modified by precedent and politico-economic considerations. In particular it shows that the consequent per capita final financial allocations (the intensity of aid) are greatest not for the poorest areas: up to 84% of EU GDP per head, aid increases as income increases. The analysis also emphasizes the on–off nature of the EU policy. In the light of these results a series of simulations are carried out. Attention is given first to a more economically sensitive treatment of transition regions, whose relative growth results in shifts from one category to another and to a mechanism capable of providing differentiated support to all disadvantaged regional economies. Attention is then given to ways of ensuring that final allocations are inversely proportional to income, and that most aid is concentrated on the most disadvantaged areas (Section 5). In the conclusions attention is paid to guidelines which might apply to the reform of the EU Cohesion Policy.     

The Impact of European Structural Funds in the South of Spain

Over the last decades, the European Union has contributed to the development of poor regions of the Associate Members. This is the case of Andalusia, an Objective 1 region for the European regional policy in the south of Spain. In this paper we carry out an impact analysis of the European Regional Development Fund (ERDF), one of the most important Structural Funds, to the object of assessing its effect on aggregate and sectoral production, price indexes and consumers’ welfare. To this extend we compute an Applied General Equilibrium Model (AGEM) and we present a counterfactual analysis with simulations for three representative years: 1990, 1995 and 1999. We conclude that regional funding has deeply contributed to Andalusian regional development and the effectiveness of the funds seems to be larger for the last years of the study.     

Structural Funds of the European Union in Poland—Experience of the First Period of Membership

The aim of this article is to present the results of the first period of taking advantage of Structural Funds in Poland. The analysis refers to realisation of the planned activities in the strategic document which is the National Development Plan 2004–2006, being a base of the new model of the Polish regional policy. The obtained results show the level of success of Structural Funds including the structure being a result of Operational Programmes which are a part of the National Development Plan, and the structure of beneficiaries, among which the listed ones are: units of local governments, businessmen, non-governmental organizations and educational institutions. In each case the analysis includes regional differences of the absorption process which allows us to define the influence of Structural Funds on changes of regional economic development in Poland.     

EU multi‐level governance patterns and the cohesion fund

The new Cohesion Fund (1993–1999) seems to challenge the multi‐level pattern of governance of the Structural Funds, where sub‐national actors and Commission have a prominent role in the decision‐making and implementation procedures. The current article analyses the apparent ‘state‐centred’ nature of this new redistributive instrument of the EU, through three main points. Firstly, by a study of the role of the Commission in the implementation of the Cohesion Fund projects; secondly, by looking at the recent attempts to enforce the conditionality principle; and finally, by a study of the role of sub‐national actors in Spain in implementing the Fund. The article concludes with mixed results, showing how non‐state actors play a larger role in the implementation stage than it seemed at first glance, but also that important state‐centric elements coexist, as one of the states has recently achieved a political compromise with the Commission about the enforcement of the conditionality principle following most of its initial premises.     

The dynamics of the community support framework for Greece and its contribution to regional convergence

The objective of this paper is to shed light on the dynamic aspects of the Community Support Framework for Greece and to further explore its contributions to regional convergence. Given that, the majority of the Greek regions have been classified among the poorest regions of the European Union (EU) with a major inter and intra regional divergence gap, the issue of catching up the convergence factors acquires paramount importance in view of the new trends of European Community (EC) Regional Policies. Unquestionably, the convergence of the Greek regions requires a series of macroeconomic management devices and the encouragement of a series of soft and hard infrastructure projects which will restructure, upgrade and adjust their regional economy. The analysis of this paper will focus on the assistance stemming from the Regional and Structural Funds of the EU, plus the Cohesion Fund with the aim to uncover the factors which determine the extension and intensity of the convergence and divergence procedure. Using the data from the Community Support Framework (CSF I) (1989–1993), which has already been completed, attention will be paid to some of the basic problems which decisively impedes the real convergence of the Greek regions. The author will also examine in depth the criteria used by the competent authorities in allocating the funds to the regional bodies in relation with the existing regional imbalances and then he will propose a new synthetic method considering more factors which influence the final allocation approach. The conclusions of the paper might systematically unravel a series of problems facing the regions both socio‐economic and administrative which if they are not effectively confronted may possibly enlarge the existing divergence gap of the Greek regions.     

EU Regional Policy After 2006: Will Scotland Notice the Difference?

In order to accommodate the recent enlargements of the European Union (EU) there has been considerable changes to the operation of EU regional policy which means that Scotland along with other regions in the EU-15 will receive considerably less money from the Structural Funds in the future. This article discusses the extent to which the reduction in EU funding for economic development will impact on the Scottish economy. The issue is explored by considering the contribution, which Structural Funds have made in the past to economic development in Western Scotland, which has received the lion's share of the money allocated to Scotland. It is suggested that whilst the amount of economic development in Scotland will not be significantly reduced as a result of the decline in EU funds the types of projects and organizations receiving funding will alter because of changes made to the way in which the funds are administered in Scotland.