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American Economic Journal: Economic Policy: Vol. 5 No. 4 (November 2013)

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Absorptive Capacity and the Growth and Investment Effects of Regional Transfers: A Regression Discontinuity Design with Heterogeneous Treatment Effects

Article Citation

Becker, Sascha O., Peter H. Egger, and Maximilian von Ehrlich. 2013. "Absorptive Capacity and the Growth and Investment Effects of Regional Transfers: A Regression Discontinuity Design with Heterogeneous Treatment Effects." American Economic Journal: Economic Policy, 5(4): 29-77.

DOI: 10.1257/pol.5.4.29

Abstract

Researchers often estimate average treatment effects of programs without investigating heterogeneity across units. Yet, individuals, firms, regions, or countries vary in their ability to utilize transfers. We analyze Objective 1 transfers of the EU to regions below a certain income level by way of a regression discontinuity design with systematically varying heterogeneous treatment effects. Only about 30 percent and 21 percent of the regions—those with sufficient human capital and good-enough institutions—are able to turn transfers into faster per capita income growth and per capita investment, respectively. In general, the variance of the treatment effect is much bigger than its mean.

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Authors

Becker, Sascha O. (U Warwick and CESifo, Munich)
Egger, Peter H. (ETH Zurich and Federal Reserve Bank of Dallas)
von Ehrlich, Maximilian (U Bern and CESifo, Munich)

JEL Classifications

C21: Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions
F35: Foreign Aid
H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H77: Intergovernmental Relations; Federalism; Secession
R11: Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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