Yannis Psycharis, Vassilis Tselios (p), Panayotis Panatzis

Ugo Fratesi

Inclusive growth has become one of the main concerns of contemporary economic policy. Based on statistical evidence, economic growth does not necessarily create opportunities for all segments of the population and prosperity is usually fairly unequally distributed across society. Furthermore, due to the recent economic recession not only personal and households income have been reduced but also income inequality has been increased. As a result, the issue of inclusive growth has been placed at the forefront of economic analysis and public policy. Inclusiveness has been one of the main policy priorities of the European Union for the programming period 1994-2020 and this will be extended to the new programming period 2021-2027.
This paper sets out to examine empirically the statistical association/relatedness between cohesion policy and income inequality in Greece during the period 2000-2015. The research question under examination is whether the EU cohesion funds have contributed to the reduction of inter-personal income inequality within regions in Greece or not. Analysis is based on a novel dataset which combines two sets of statistical data. The first set includes data regarding the annual expenditures of co-financed EU funds at NUTS II and NUTS III geographical levels in Greece. The second set includes data regarding the statistical estimation of declared income inequality at the NUTS II and NUTS III geographical levels in Greece throughout the study period under consideration.
Analysis is based on an econometric model and apart from the cohesion policy expenditures and income inequality indicators it utilizes a large number of control variables such as demographic, economic and geographical ones. The analysis which is covering the time periods before and during the economic crisis as well as three different programming periods 2000-2006, 2007-2013, and 2014-2020 provides evidence that cohesion funds have contributed to reduction of income inequality in the Greek regions. The paper concludes with some policy proposals regarding the consideration of inclusiveness as a key factor of the EU cohesion policy for the new programming period 2021-2027.

Gianluigi Coppola (p), Sergio Destefanis

Ugo Fratesi

In the rather large literature on EU Structural Funds, an interesting line of research is growing (Becker et al., Crescenzi-Giua, Fratesi et al., Pellegrini et al.), which applies counterfactual analysis in this field (mostly in a cross-sectional set-up). The present paper aims to identify effective practices and sectors of intervention for EU funds, by analysing the effects on regional GDP per capita of an array of EU cohesion funds. We set up a counterfactual analysis of the impact of EU on VA per capita through a control function approach in a macroeconometric panel framework. A further element of novelty in the present work vis-à-vis the existing literature resides in the fact that the empirical analysis is carried out by considering the VA’s of various sectorial aggregates (the four sectors agriculture, energy and manufacturing, construction, services, plus some smaller aggregates: market services, non-market services, manufacturing, energy plus market services). Sectorial VA’s are jointly modelled through a multi-input multi-output tranformation function (Kumbhakar, EJOR, 2012, 2013). This transformation function works well, having a fit that is higher than for aggregate specifications, and uncovering sectorally differentiated effects. Sectoral evidence implies that EU Funds generally favour services, while reducing the share of agriculture and (less so) of industry in the economy. Our sectoral evidence implies that ESF and (a bit less) national co-financing favour services, while reducing the share of agriculture and (less so) of industry in the economy. ERDF and private investment do not show any sectorial bias. National co-financing imparts a small bias (not shown below) in favour of private services.

Riccardo Crescenzi, Ugo Fratesi , Vassilis Monastiriotis (p)

Gianluigi Coppola

A large literature has investigated the growth effects of Cohesion Policy, finding on the whole positive effects albeit often with a number of qualifying conditions. The rationale of Cohesion Policy, however, concerns predominantly not the enhancement of regional growth per se but rather the enhancement of productive capacities in the targeted regions. Motivated by this observation, in this paper we examined the contribution of Cohesion Policy expenditures on private capital expansion (regional investment), focusing both on the extensive and the intensive margin (capital expansion and the productivity of capital, respectively). Our analysis unveils a very favourable picture for Cohesion Policy with regard to the extensive margin, implying a very successful role in mobilising private capital and raising local capacities for growth. At the same time, it also shows that the effect of Cohesion Policy on the intensive margin (the productivity of capital) is if anything negative, implying no additional ‘productivity dividend’ for Cohesion Policy interventions with regard to private investments. We discuss the implications of these findings in relation to the future of Cohesion Policy post-2020 and in particular in relation to the recent and prospective shift towards ‘new instruments’ for leveraging private investment and encourage high-returns entrepreneurial risk-taking.