Mediating effects of cohesion policy and institutional quality on convergence between EU regions: An examination based on a conditional beta-convergence model with a 3-way multiplicative term

Abstract

The paper contributes to the existing literature on the EU's Cohesion Policy outcomes by extending the conditional beta-convergence model with a 3-way multiplicative term to examine the mediating effects of the Cohesion Policy, institutional quality, and their interaction on regional convergence. The empirical analysis based on conditional slope coefficients and conditional standard errors provides evidence that both the mediating factors under consideration contribute positively to boosting regional convergence in the EU at the NUTS 2 and 3 disaggregation level, but with much bigger success over the 2007-2013 programming period compared to the previous one. Moreover, Cohesion Policy and institutional quality act as substituting rather than complementary mediating factors.