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A key factor for a stable and solid development is the gain in labor productivity. The regions that manage to pull out of poverty and improve the living standards of their inhabitants, in fact, need to be able to diversify away from agriculture and other traditional sectors. In doing this, the speed with which labour and other resources move to modern economic activities is the key factor that differentiates successful regions from unsuccessful ones. In the paper productivity growth is decomposed in two parts: the ?within? and the ?structural? variation. The first denotes the variation of productivity due exclusively to a change inside individual sectors (employment is kept unaltered) while the second term captures the productivity effect of labour reallocations across different sectors. It is essentially the inner product of productivity levels (at the end of the time period) with the change in employment shares across sectors. When changes in employment shares are positively correlated with productivity levels, this term will be positive, and structural change will increase economy-wide productivity growth. The spatial distribution of ?within? and ?structural? variation gives an interpretation of the spatial patterns that characterize European productivity growth and its sustainability in the long run. In the second part of the paper, to assess what are the impacts of the variables that play a role on ?structural? and ?within? variation, a cross-sectional growth regression model is used. At this regard, it is conceivable that the growth of productivity, and of its two components, depends on own region as well as neighbouring region characteristics, on the spatial connectivity structure of the regions, and on the strength of spatial dependence. In order to take account all these aspects in the analysis, a spatial Durbin model is adopted. This spatial econometric model allows also to solve both the problem of spatial dependence in the residuals and of omitted explanatory variables. Furthermore it includes both spatially lagged dependent and independent variables and allows to accounts for spatial spillover effects: a change in a single explanatory variable in a certain region has a ?direct impact? on that region as well an ?indirect impact? on other regions due to the spatial connectivity relationships. Finally regarding the conditioning variables included in the regression model, emphasis is put on the Structural Funds and on an institutional regional quality indicator. Assessing their roles on structural change is essential to develop politics able to use the full potential of the Structural Funds.

Since formation of European Union (EU) it has had great changes and developed both by expanding and creating close mutual cooperation among the involved countries. New member states have joined the first six founder states, and now EU unifies 27 states. Greater changes have affected the set objectives and activity spheres: from the war industry – coal and steel sector – over-national control institutions the aim of which is to ensure stable peace in Europe, nowadays EU has become a union that comprise more than twenty common policy and activity spheres. The integration process of Europe has been continued by setting new objectives, meeting new challenges and looking for better solutions. EU budgetary funds provide support for wide scope of activities. This support regarding its scope may be changeable – starting from the whole covering of expanses and finishing with financial support of only some percents. The range of potential recipients of financial aid is also wide. Not only member states but also candidate states, separate municipalities, public organizations, private enterprises, universities and even separate individuals can be among them.In many with structural funds related documents it is highlighted, that the aim of EU structural funds is to eliminate the regional and social inequalities among EU member states and to improve economical and social cohesion throughout all Europe. Certainly these funds is a great benefit for EU peripheral countries like Ireland, Baltic states, and they can substantially promote development of these countries. Though one has to remember that a substantial financing also creates a risk and that inadequate use of these funds can stimulate regional inequality, social outcast, environmental degradation and corruption.Ireland is one of economically most developed, industrial, trade – oriented states, that until now has managed to use means of EU structural funds most successfully. The received finances from EU support funds have considerably favoured state's economical growth.During ...

SUMMARYThe effectiveness of EU Structural Funds on the economic performance of the receiving countries has been extensively investigated in the last twenty years. The results indicate that the impact of these funds on economic growth is conditional on the quality of the institutions of the receiving countries. In the case of countries with poor institutional quality, the effect of Structural Funds on economic growth will be negative. The reason being, that Structural Funds do affect the allocation of recourses and in countries with poor institutional quality the misallocation of resources might worsen. For example, corruption might divert funds from productive activities; increased opportunities for rent seeking might absorb resources and so on.To the extent that EU Structural Funds have a negative impact on the allocation of resources and growth this might affect the attractiveness of the country as a location for FDI. In this research we investigate the impact of EU Structural Funds on the volume of FDI inflows in EU‐15 countries. The econometric analysis is based on a panel analysis of EU‐15 countries for the period 1970 – 2005. We utilize a variety of econometric techniques appropriate for this kind of panel data (fixed effects, random effects, OLS and GMM estimators). The results are extremely robust to these alternative specifications. The empirical findings are consistent with the findings of previous studies regarding the determinants of FDI and indicate that the impact of EU Structural Funds on FDI inflows critically depends on the institutional quality of the receiving countries. For countries with high quality institutions the EU Structural Funds have a positive impact on FDI, for countries with low quality institutions the impact will be negative.