Are Regional Fiscal Multipliers on EU Structural and Investment Fund Spending Large?
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Washington, DC: World Bank
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The European Commission’s
“NextGenerationEU” COVID-19 recovery package has underscored
interest in the size of regional fiscal multipliers in
Europe. While the objective of these funds is the long-term
transformation toward more sustainable green growth and
digitalization in EU economies, several recent papers have
also focused on their short-term stimulatory effects and
have estimated large short-term regional multipliers on
historical EU structural and investment fund spending. This
has contributed to a view that EU funds can boost growth
substantially not only in the long term, but also in the
short term in countries receiving large flows, particularly
in Central and Eastern Europe. This paper reevaluates the
evidence by estimating regional short-term multipliers using
recent data on EU fund spending and a leave-one-out
predicted disbursement schedule instrument. In contrast with
much of the recent literature, there is little evidence of
large relative GDP multipliers at either the national or
subnational level in the short term. This is despite a
strong response of regional investment to EU funds, which
often increases euro for euro. The results suggest that
expectations should be tempered on using EU structural and
investment funds as a tool for short-term regional fiscal
stimulus, and instead policy makers may want to focus on the
long-term benefits of EU funds, in line with their original purpose.
Palabras clave
FISCAL MULTIPLIER, EUROPEAN UNION, MONETARY UNION, EU ECONOMIES, SHORT-TERM REGIONAL FISCAL STIMULUS, COVID-19 ECONOMIC RECOVERY PACKAGE, SUSTAINABLE GREEN GROWTH