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Cohesion Policy Instruments And Economic Growth: Do Institutions Matter?

Author

Listed:
  • Alen Host

    (Faculty of Economics Rijeka)

  • Vinko Zaninovic

    (Faculty of Economics Rijeka)

  • Kresimir Parat

    (Primorje - Gorski Kotar County)

Abstract

The EU Cohesion policy is based on a complex system of fiscal transfers, their main goal being to accelerate economic and social cohesion. In this paper, the contributions of the Structural funds and Cohesion fund (SFCF) to economic growth on national level while controlling for the institutional quality are tested. Aim of the paper is show whether institutional quality is a bottleneck for effective usage of SFCF. The analysis is based on the country-level data during 2000-2013 period. In the presented econometric models, we emphasize the importance of the institutional quality on the economic growth. The results show that when Institutional Quality Indicator as a regressor is included together with the size of inflows from SFCF, SFCF inflows have no influence on economic growth. Moreover, we found that neither the institutional quality separately or in interaction with SFCF inflows, is a statistically significant factor for economic growth in the EU-27. The results are signifincantly different when we apply the same methodology on two subsamples, where we distinguish between countries with high and low level of institutional quality index.

Suggested Citation

  • Alen Host & Vinko Zaninovic & Kresimir Parat, 2017. "Cohesion Policy Instruments And Economic Growth: Do Institutions Matter?," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 26(2), pages 541-559, december.
    • Handle: RePEc:avo:emipdu:v:26:y:2017:i:2:p:541-559
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    References listed on IDEAS

    as
    1. Sjef Ederveen & Henri L.F. de Groot & Richard Nahuis, 2006. "Fertile Soil for Structural Funds?A Panel Data Analysis of the Conditional Effectiveness of European Cohesion Policy," Kyklos, Wiley Blackwell, vol. 59(1), pages 17-42, February.
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    6. Knack, Stephen & Keefer, Philip, 1995. "Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Indicators," MPRA Paper 23118, University Library of Munich, Germany.
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    More about this item

    Keywords

    SFCF; institutional quality; economic growth; convergence;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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