CEE and all-Europe specifications and are even above 50 for the non-CEE sample. This is much larger than the 12-28 range for a weak-IV F-statistics in Kraay (2014) and well above Staiger and Stock’s (1997) rule of thumb of 10.

Country-level multiplier estimates (Columns 4-6) are generally larger than those at the subnational level, though they are typically less than one, more noisily estimated and significant only for the all-Europe sample. We focus on the all-Europe sample first, as with annual country-level data sample size is a limiting factor; wider standard errors lead to a general lack of significance for the country-level split CEE/non-CEE sample. For the OLS specification, the whole-Europe multiplier is 0.8 and is significant at the 5% level (Panel A, Column 4). The all-Europe IV estimates are marginally smaller at 0.67, but 50% wider standard errors mean significance is now at the 10% level. The first-stage coefficient is smaller than for the NUTS2 subnational regressions, but still large ( = 0.8 ), with a first stage F-statistic above 80. As foreshadowed earlier, both CEE and non-CEE multipliers are always insignificant, however the CEE point estimates are larger than those for θθ<sup>�</sup> the non-CEE group. The insignificance of the CEE 2SLS multipliers is because the first stage is weak.<sup>46</sup> _Robustness to reported EU spending._ In the discussion above, we emphasized that one advantage of our approach was using modeled rather than reported EU spending, which is likely to be closer in time to when the actual spending takes place. In Online Appendix Table A3.1 we re-estimate our results using reported EU spending. At the NUTS2 level for All-Europe and non-CEE, results are fairly similar: small or insignificant multipliers at the 5% level for OLS and IV specifications. However, at the NUTS2 level for CEE countries the raw spending multipliers are sometimes a little higher, though never close to 1. More specifically, the NUTS2 CEE 2SLS multiplier is now 0.53 and significant at 1% (up from 0.13 and insignificant in Table 1), and the OLS CEE multipliers are now 0.47 (down from 0.67 in Table 1). At the country level, estimates using raw spending are similar for raw and modeled spending for IV specifications — both insignificant — but more volatile for the OLS specifications across samples using raw spending. More specifically, OLS CEE multipliers are now positive and significant, but OLS non-CEE multipliers are negative and significant (both were previously insignificant using modeled spending In Table 1). Positive and negative multipliers are difficult to rationalize and might be due to mismeasurement in the raw spending data.

# **3.2 Effect on Investment**

One possible explanation for the modest or null effects of EU funds on regional GDP growth is that EU funds do not affect investment spending.<sup>47</sup> This could be because of measurement issues, or perhaps EU funds are used to finance projects that would have been implemented anyway. To test these hypotheses, Table 2 presents the results of a different regression specification, where on the LHS, the growth rate of GDP (from Table 1) is replaced by the change in total investment as a share of GDP (Table 2). The RHS and IV approach stays unchanged.<sup>48</sup> The regression now has an “investment multiplier” specification, namely the € total investment generated by an extra 1€ of EU funds. We focus on total investment (rather than public investment) as public investment is not available at the NUTS2 level.

46 We tried weighting the country-level regressions by the number of NUTS2 regions and we got a similar weak first stage for CEE countries as in column 5 of table 1 (not reported). This suggests that the strong first stage for CEE countries at the NUTS2 level is due to variation in EU funds at NUTS2 level rather than the weighting of the different countries. 47 Most projects they are supposed to fund might be classified as investment, especially public investment.

48 The results are similar, though slightly smaller, if lagged change in investment as a share of GDP is added as a control (rather than the lagged growth rate of GDP as in equation 1).

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