Becker, Sascha O., Egger, Peter and von Ehrlich, Maximilian (2011) Absorptive capacity and the growth effects of regional transfers : a regression discontinuity design with heterogeneous treatment effects. Discussion Paper. Centre for Economic Policy Research, Coventry. (Unpublished)

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Abstract

Transfers to individuals, firms, and regions are often regulated by threshold rules, giving rise to a regression discontinuity design. An example are transfers provided by the European Commission to regions of EU member states below a certain income level. Researchers have focused on estimation of the average treatment effect of this program, assuming that it does not vary in a systematic way across units. We suggest a regression discontinuity design which allows for parametric or nonparametric identification of heterogeneous average treatment effects that systematically vary with observable characteristics in order to shed light on the role of absorptive capacity in determining the impact of regional transfers on economic growth across regions in the European Union. The results suggest that only about 47% of the regions, namely those with a sufficiently high endowment with human capital and a high quality of government, are able to turn transfers under the Union's Objective 1 Structural Funds programme into faster growth. Those regions are the ones which are responsible for a positive average effect of the programme.

Item Type:	Working or Discussion Paper (Discussion Paper)
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Economics
Series Name:	CEPR Discussion Paper
Publisher:	Centre for Economic Policy Research
Place of Publication:	Coventry
Date:	July 2011
Number:	No.8474
Status:	Not Peer Reviewed
Publication Status:	Unpublished
Access rights to Published version:	Restricted or Subscription Access
URI:	http://wrap.warwick.ac.uk/id/eprint/45517

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