The contribution of Cohesion Funds and nationally funded public investment to regional growth: evidence from Greece

ABSTRACT

This paper sets out to estimate the contribution of European Union co-financed and nationally funded public investment expenditures to regional growth in Greece during the period 2000–14. The results are sensitive to the time period and the geographical level of the interventions. While nationally funded projects boosted the growth performance of the regions before the eruption of the economic crisis, there is no indication that the European Union co-financed projects have led to increased growth. The results question the additionality and coordination between European Union Cohesion Policy and the domestic regional policies for the promotion of regional growth in the less well-off regions of Europe.

KEYWORDS:

• Cohesion Policy
• public investment
• regional growth
• regional policy
• Structural Funds

JEL:

• R11
• R12
• R53
• R58

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

ORCID

Yannis Psycharis http://orcid.org/0000-0001-8674-4702

Vassilis Tselios http://orcid.org/0000-0001-6330-7278

Notes

1. According to the EUROSTAT NUTS classification, Attica, which houses Athens, the capital city of Greece, has been classified as a NUTS-II and -III region.

2. That is, for t₀= 1, the annual growth is between 2000 and 2001; for t₀= 2, the annual growth is between 2001 and 2002; for t₀= 3, the annual growth is between 2002 and 2003; and for t₀= 14, the annual growth is between 2013 and 2014.

3. We further explored whether the economic crisis that occurred in 2009 necessitates the use of time-interaction effects. The Chow test (Chow, 1960), which tests for the presence of a structural break in 2009 and can be assumed to be known a priori, shows that the independent variables have different impacts on the two periods.

4. We have calculated that the within and between variation from the data and the cross-sectional variation is high while the time-series variation is low.

5. Spatial dependence is measured by the k-nearest neighbouring weight matrix, with k= 5, 7 and 9 (Rodríguez-Pose et al., 2012).

Additional information

Funding

This research benefited from a Regional Studies Association Membership Research Grant (MeRSA) awarded to Yannis Psycharis for the Research Project ‘Public Investment, Economic Crisis and Austerity: Evidence from Greece’, for the period November 2016–April 2018.