Rural development funding and agricultural labour productivity: A spatial analysis of the European Union at the NUTS2 level

With more than 50 percent of the European population (EU-24) living in rural areas and a renewed focus on stimulating smart, sustainable and socially inclusive growth, Rural Development Programmes (RDPs) are an important instrument for economic, social and environmental policies. Evaluating the impact of rural development programmes is, however, complicated due to the widely varying policy targets of RDPs as well as their substantial heterogeneity across rural areas. In this paper we use spatial econometric techniques to evaluate RDPs in the European Union, at the NUTS2 level, and focus specifically on labour productivity in the agricultural sector. To address the clear spatial patterns in the distribution of agricultural labour productivity, we employ regression models in which spatial heterogeneity and spatial dependence are explicitly modelled to quantify the impact of RDPs.