I will survive! The impact of place-based policies when public transfers fade out

Are place-based policies capable of taking lagging areas to a higher growth trajectory permanently? We answer this crucial question by investigating what happens when strongly subsidized regions experience a substantial reduction in funding. By analysing an extensive database via the mean balancing approach, we estimate the causal impact of exiting the convergence region status of the European Union regional policy. We find that only regions that experienced a considerable reduction in funding during a recession suffered a negative impact on economic growth. However, the impact varies with the features of the regions and the local economic context.