The economic impact of structural and Cohesion Funds across sectors: Immediate, medium-to-long term effects and spillovers

The EU Cohesion Policy has progressively diversified the financed sectors, with possible heterogeneous impacts on local growth. However, the literature is still largely oriented to the analysis of aggregate impacts. Our study offers a granular investigation of the sectoral impacts of Structural and Cohesion Funds on European NUTS 2 over the period 2007-2014. We find that expenditures in energy, R&D, and transportation sectors stimulate higher GDP per capita growth with persistent effects, coherently with reduction of production costs, higher accessibility and innovation in recipient regions. These effects are enhanced when expenditures are more diversified across sectors. Spatial panel models show that transport sector generates the highest spillovers, leveraging on agglomeration and proximity, while at geographical level we find substantial spillovers cross-cutting national boundaries. From a policy perspective, our analysis suggests how spatial and sectoral effects can contribute to the design of a more effective allocation of the EU budget.