ETSG 2013 — No. 377 — Preliminary work Regional Policy and Firm Productivity Matthijs de Zwaan and Bruno Merlevede Department of Economics, Ghent University This version: 14th August 2013 Abstract One of the main objectives of the European Union (EU) is to reduce disparities between the levels of development of European regions. To this end, the EU spends nearly thirty per cent of its budget on regional policy. Considering the importance of regional policy for the EU, a careful evaluation of the effects of EU regional policy is of more than academic importance. This is the main motivation for the research at hand. Using a carefully constructed firm–level database covering al- most all EU member states for the period 2000–2006, we consider the effect of EU regional policy on (the distribution of) firm–level productivity and employment in European regions using a matching design for treatment effects. Our research thus offers a more detailed view by considering policy effects on firm level productivity as an important channel through which aggregate growth may come about. Pre- liminary results show no evidence for an average effect of regional policy. Further exploration will focus on effects across the distribution of firms. 1. Introduction The European Union (EU) goes to great lengths to stimulate economic development in disadvantaged regions, and thereby to reduce economic and social disparities between regions. Such large differences may lead to economic and political instability, under- mining possibly the European single market and the monetary union. For better or worse, the EU aims to reduce economic and social inequalities through its regional policies. The expenditures for these regional policies are the second biggest expendit- ure in the EU budget; only the budget for agricultural policy is larger. The importance of regional cohesion policy for the goals and the budget of the EU warrants careful eval- uation; this is the main motivation for the research presented in this paper. Previous 1