Does cohesion policy work? Some general considerations and evidence from Spain

This paper was prepared for a conference on income convergence and European regional policy organized by the Bertelsmann Foundation, the World Bank and Fundación CIDOB.Over the last two decades, the EU has adopted an active cohesion policy aimed at reducing income disparities by subsidizing various types of investment programmes in the Union's poorest regions through the so-called Structural Funds. This policy has often been questioned on at least two different grounds. Perhaps the most common argument is that it has not worked: since most of the assisted regions continue to be relatively poor in spite of these programmes, EU grants are mostly a waste and should therefore be scrapped, or at least severely curtailed. The second objection, which is often not explicitly stated but often lurks behind calls for cuts in structural programmes, is based on the view that there is no reason why the EU should engage in redistribution across its constituent territories. The Commission's view on this last issue seems to be that such redistribution is necessary because economic integration will tend to hurt the poorer regions of the Union by facilitating the concentration of economic activity in certain core areas.I gratefully acknowledge financial support from the Spanish Ministry of Science and Technology under grant SEC99-1189 and from Fundación Caixa Galicia