Public Investment, Growth and Fiscal Constraints

Public Investment, Growth and Fiscal Constraints

Challenges for the EU New Member States

Edited by Massimo Florio

This book makes a unique contribution in advancing understanding of the fiscal condition and growth potential of the New Member States of the European Union. It provides new data, policy evaluation, and offers national and regional perspectives. The core research questions are the effect of public investment in the context of macroeconomic disequilibrium and how it is possible to finance capital accumulation in the present and future conditions of mounting public sector debt.

Chapter 8: Structural Funds Business Support and Employment Growth in Manufacturing: Perspectives for the New Member States

Luigi Moretti

Subjects: economics and finance, public finance, regional economics, urban and regional studies, regional economics


Luigi Moretti* INTRODUCTION AND MOTIVATION 1. The Structural and Cohesion Funds (SCF) are the European Union’s (EU) financial instruments for the achievement of social and economic cohesion through the reduction of disparities between the levels of development of the regions (art. 130a-b Treaty of European Union). The SCF finance and support a variety of investments affecting regions’ business environment and capital endowment through a variety of channels. For instance, the SCF can potentially create better public infrastructure, improve workforce skills and the capacity to adapt, help the reconversion process of declining industries, or improve the availability of funds to increase productivity and production capability through R&D and direct business support. Overall the SCF account for almost two thirds of the EU budget, and one of the main areas of expenditure is business support (about one fifth of the overall funds allocation across EU-27 in 2007–2013); this is the financial scheme geared to directly assist large business organizations, small and medium enterprises and the craft sectors, and the adoption of research technology, development and innovation activities (RTDI). This chapter illustrates the impact of SCF business support on manufacturing performance in a sample of regions belonging to the eight New Member States from Central and Eastern Europe that joined the EU in 2004 (NMS-8) and, in particular, it has the aim of extending the analysis proposed by Florio and Moretti (2009), who investigate the relationship between SCF expenditure in business support and employment growth. In their analysis, they exploit cross-industry...

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