European Union regional policy and development in Spain: capital widening and productivity stagnation over 1989-2010

Total factor productivity (TFP) in Spain over the period 1989-2010 has followed a decreasing trend. This paper explores to what degree the transport infrastructure investments financed with European Union Structural Funds (ERDF) and Cohesion Funds (CF) including the compulsory national cofunding (EUINFP) prevented TFP over this period from falling further. It estimates an augmented Mankiw-Romer-Weil model for the 17 Spanish regions over the period 1989-2010 and finds positive marginal contributions on the TFP growth rate for EUINFP, research and development, and the interdependencies between EUINFP and private capital. These factors partially offset the dismal TFP performance of Spain over this period.