Impact of EU subsidies on the of rural areas in Hungary

In recent years, we experienced a growing interest in the evaluation of EU co-funded programmes. The paper is a first attempt to analyse the impacts of such support on the wellbeing of Hungarian rural areas between 2002 and 2008, employing a two stages approach. In the first step, we construct a multi-dimensional RDI (Rural Development Index) measuring the overall level of regional development and quality of life in Hungarian small regions. In the second step we apply propensity score matching approach to evaluate the impact of the regional subsidies on the RDI. Estimations reveal four main findings. First, calculations suggest that concentration in the EU support grows with increasing amount of subsidies. Second, the convergence of support can be also observed. Third, we find considerable mobility in terms of the level of subsidies during analysed period. This indicates that there has been chance for poorly subsidised regions to improve their relative position and vice versa. Finally, our results imply that it is very difficult to identify any impacts of subsidies, because estimations are highly sensitive to the chosen indicators. The size of identified effects is rather small and its direction may equally be positive or negative. However, we can conclude that irrespective to the sign of estimated coefficients the size of impact of regional subsidies is negligible. Consequently, further research is needed to explore impacts mechanisms of subsidies.