Does cohesion funding work? Evaluating the employment effects of Objective 1 funding under the European Union's cohesion policy

This thesis evaluates the effectiveness of Objective 1 funding, the largest funding program of EU cohesion policy, at reducing regional unemployment and long-term unemployment as well as at stimulating regional economic growth. EU cohesion policy is designed to promote regional convergence in a number of economic indicators. This thesis tests the hypothesis that regions receiving Objective 1 funding experienced more favorable changes in their unemployment and long-term unemployment rates as well as faster economic growth than regions without such funding. Using time series data from the Eurostat regional database for the period 2000--2007 and a differenced Ordinary Least Squares model with year dummies, this thesis finds that Objective 1 funding is associated with a reduction, or slower increase, in unemployment in recipient regions. No significant association is found between Objective 1 funding and long-term unemployment. The study also corroborates recent findings that Objective 1 funding has small, significant and positive effects on regional economic growth. The thesis concludes, therefore, that Objective 1 funding meets its stated objectives. It is most effective in recent accession countries. Questions remain, over potentially detrimental policy design features such as the additionality principle or co-financing requirements. Moreover, there is not enough data on essential aspects of cohesion policy, such as how much funding regions received. A central recommendation, therefore, is to improve data collection on cohesion policy in order to permit more conclusive empirical evaluations.