CEE for the 2001-09 period (borderline significant at the 5% level)—is not robust to excluding influential observations.<sup>61</sup> Online Appendix Table A6.3 instead splits samples by programming period.<sup>62</sup> 2SLS multipliers are almost always insignificantly different from zero and are always insignificantly different across the three programming periods – perhaps due to the shorter sample.<sup>63</sup>

**Greater regional disaggregation.** In this section we disaggregate beyond the CEE/non-CEE classification in Table 1 into North and Southern Regions. There are two reasons for this. First, the economic effects (structure of economies, efficiency of spending etc.), might be different in Northern and Southern Europe. The differences between Northern and Southern Europe became stark following the European debt crisis around 2010 and continue to drive the political discussion in Europe.<sup>64</sup> Second, it could be that the size and dynamics of EU spending differs in the Northern and Southern parts of Europe, for example: Spain, Portugal, Italy and Greece should not be grouped with richer Norther countries based on how they spend EU funds. Indeed, Figure 2 shows some differences between the spending patterns of Bulgaria and Romania and other CEE countries. Naturally, the disadvantage of greater disaggregation is smaller sample sizes, especially at the country level.

Online Appendix Table A6.4 shows that even with further disaggregation there is little robust evidence of large multipliers on EU spending. At the subnational level, OLS multipliers are all less than one or insignificant, as are IV multipliers. At the country level, there are occasionally some larger multipliers, such as 2.65 for Southern CEE using OLS, but they are not robust to the IV specification.

Greater disaggregation also sheds some light on what has been driving the results in the main text. For example, Table 1 found positive and significant OLS subnational multipliers for CEE countries (albeit one less than 1), which is repeated in Online Appendix Table A6.4 (column 2, Panel A). The problems of weak instruments for CEE countries at the country level in Table 1 are in part due to a negative first stage for northern CEE countries (Column 3 Panel D).

# **5.  Discussion: Mechanisms and Interpretation**

# **5.1 Possible Mechanisms**

EU fund spending aims to boost sustainable long-term growth by supporting the transformation towards more sustainable green and digital EU economies. In the short term, it is also sometimes thought to stimulate economic activity through the standard Keynesian aggregate demand channels which, in theory, provides policy makers with a tool to boost GDP also in the short term, for instance, to support the recovery from the COVID-19 crisis. That is, an increase in government spending in a subnational region or country increases demand for locally produced goods and services. As prices and wages are sticky in the short term, firms respond to higher demand by increasing output (rather than increasing prices); for example they could hire 61 Specifically, if either Poland (2009) or Estonia (2016) or both are excluded from the sample, the estimated coefficient becomes insignificant.

> 62 To run that specification, we use the same data as Table 1. This means that we are getting the coefficient of the payments received those specific years, and so this means that payments received during the years of a certain programming period can belong to previous programming periods.

> 63 While the 2001-06 country-level IV multiplier is large and significant for the All-Europe sample, this is not robust: the multiplier becomes insignificant when dropping either Latvia or Estonia.

> 64 For a discussion on the structural differences within the eurozone, see, for example, Bagus (2012).

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