The role of institutions in shaping geography of development disparities across european union

Abstract

Assessing the effect of regional financial support provided by the European Union (EU), research examines whether support promotes growth, increases productivity and creates new jobs. Scientific studies rarely discuss the effect of support in the light of the geography of development disparities despite the fact that cohesion is the ultimate goal of the EU's regional policy. Moreover, previous contributions show the importance of factors that condition the effect of support, thus raising the question of the heterogeneity of effects across regions. In the light of these facts, this paper aims to propose a model that supplements a new strand of literature based on a quasiexperimental approach and to assess the effect of support on territorial disparities capturing its heterogeneity. An empirical application is based on NUTS 3 level data over the 2000-2006 programming period (PP) and an estimation of the effects on the dynamics of disparities between support beneficiaries and developed regions. Results show that support diminishes disparities and that the significance and size of the effect are highly conditioned on the institutional quality in the region.