Journal of Regional Science · 2017 · 75 citations · 36 references
Social SciencesEconomicsPublic FinanceDevelopment EconomicsRegional DevelopmentRegional EconomicsCohesion PolicyDevelopment AidEuropean IntegrationRegional AidRegional Economic DevelopmentRegional PolicyCohesion FundCohesion Policy FundingEconomic Performance MeasurementEuropean Regional Development FundRegional Development FinanceRegional Economic PerformanceRegional Economic PolicyRegional Investment Aid
Brexit will cause UK regions to lose access to EU Cohesion Policy. The study examines the effectiveness of EU funds and potential consequences of their interruption. The authors analyze Objective 1 funding effects in Cornwall and South Yorkshire. Counterfactual analyses reveal that Objective 1 funds positively affect labor markets and economic performance, but the 2006 loss of eligibility in South Yorkshire sharply reduced its EU funding share and halted prior gains, underscoring that Structural Funds improve conditions but are highly sensitive to funding cuts.
Abstract Brexit means that regions of the United Kingdom will lose access to the EU Cohesion Policy. Have EU funds been effective, and what might be the consequences of an interruption of EU financial support? This paper studies the impact of “Objective 1” funding—the highest form of EU aid—in Cornwall and South Yorkshire, two of the U.K.’s most subsidized regions. Counterfactual methodologies assessing their labor market and economic performance provide evidence of a positive effect of EU Objective 1 funds. When in 2006 South Yorkshire lost Objective 1 eligibility, this massively reduced its share of EU funds and the region was unable to sustain the gains obtained in previous years. This suggests that while Structural Funds may be effectively improving socio‐economic conditions of poorer regions, the performance of subsidized areas could be deeply affected by a reduction (or worse, an interruption) of EU aid.
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