EU funds and TFP growth: how the impact changed over time and space

Federico Aresu;Emanuela Marrocu;Raffaele Paci

2024-01-01

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Abstract

This paper investigates the economic impact of European Structural and Investment Funds (ESIF) for 262 EU NUTS2 regions over the period 2000-2019. Differently from previous contributions, we focus on the impact of ESIF on regional Total Factor Productivity (TFP) growth, which allowed us to account for other sources of regional investments. A relevant contribution of this study is the thorough examination of the effect of the four main funds included in ESIF on the productivity of a comprehensive set of EU regions. Results show the prevailing effectiveness of the European Regional Development Fund (ERDF), featuring a great deal of heterogeneity over time and across EU geographic areas. Moreover, by analyzing the role played by the European Agricultural Fund (EAFRD) on the TFP of the agricultural sector, we found that its growth impact crucially depends on the initial level of regional sectoral TFP. Our results contribute to a deeper understanding of ESIF economic impact and suggest policy implications for enhancing their contribution to regional economic development.