Working Paper: Importance of EU Regional Support Programmes for Firm Performance

Abstract
This paper investigates the effects of EU regional support on firms' productivity, the number of employees and other firm performance indicators. For this purpose, a rich firm-level dataset for Latvia, a country where investment activities are affected by the availability of EU funding, is used. The paper finds that participation in activities co-funded by the ERDF raises firms' input and output soon after they embark on them, while the effect on labour productivity and TFP appears only with a time lag of three years. However, this positive productivity premium is not homogenous across firms and is more likely to materialise in the case of initially less productive and medium-sized/large firms. Furthermore, statistical significance of positive productivity gains is not particularly robust across different estimation procedures. The study also shows that after controlling for investment expenditures, EU sponsored projects are as efficient as the privately financed ones, irrespective of where private financing comes from. 

Keywords: EU funds, productivity, firm-level data, propensity score matching
 

JEL code: C14, D22, R11