More funds do not mean more growth for the EU, according to leading economist

Economist Professor Sascha Becker presented a Chatham House paper today (Thurs) on the future of EU Structural Funds.

Professor Becker is Deputy Director at Centre for Competitive Advantage in the Global Economy, based in the Department of Economics at the University of Warwick. The main points of his paper are:

• The European Union's budget negotiations are a constant source of disagreement. Spending on the Regional Policy makes up more than one-third of the budget and has the primary aim of fostering convergence between poor and rich regions within the EU.
• To assess the effectiveness of the Regional Policy, a focus on the Convergence Objective is instructive as it provides transfers to disadvantaged regions of member states and these are assigned by a clearly defined rule: NUTS2 regions, whose GDP per capita is less than 75% of the EU average, are eligible.
• The Objective 1 programme, on average, is successful at fostering growth in recipient regions, but there is considerable variation. Regions with low levels of education and poor governance fail to make good use of EU transfers, pointing to the need for a degree of conditionality when earmarking future transfers.
• For EU Structural Funds as a whole, more funds do not mean more growth. A point is reached where returns begin to decline and additional funds do not lead to higher growth. Transfers to regions should therefore not exceed maximum desirable levels if inefficiency and misuse are to be avoided.

More information:
A copy of the paper is available: "EU Structural Funds: Do They Generate More Growth?"

Provided by University of Warwick