The Evaluation of European Structural Funds on Economic Convergence with the Application of Spatial Filtering Technique

In our work we intend to verify the impact of European policies on economic growth of NUTS-2 regions in the EU-12. The Regional Policy of the European Union has the stated aim of improving the economic well-being of the economically weak regions. This is possible by removing the disparities in wealth, by restructuring declining industrial areas and by diversifying rural areas which have declining agriculture. Our main aim is to evaluate the impact of Structural Funds in economic convergence. It is conceivable that the convergence rates of the European regions could differ because often the economies do not have homogeneous structure and that, at the same time, it would exist a mutual economic dependence among neighbor regions. Using a particular kind of spatial econometric approach, the spatial filtering technique, to estimate β- convergence we are able to manage both structural heterogeneity and spatial dependence. Our results show that without the Structural Funds the convergence rates are rather low and many regions diverge, while with the inclusion of the Structural Funds in the model, the rates of convergence increase, regardless of contribution, positive or negative, exerted by the Funds on the growth process. In model with the Funds for Objective 1 and 5b these provide a positive contribution to economic growth and make sure that all regions converge. The inclusion of Objective 2 Fund, instead, tends to have a distorting effect: its contribution to growth is negative and the average convergence rate increases but in some regions the local coefficients are negative.