The Role of Absorptive Capacity for Growth
Transfers to individuals, firms, and even regional jurisdictions are often regulated by threshold rules, giving rise to a regression discontinuity design. An example are transfers provided by the European Commission to regions of member states below a certain income level. Commonly, researchers focus on estimation of the average treatment eff ect, assuming that it does not vary in a systematic way across units. We suggest a regression discontinuity design which allows for semiparametric or nonparametric identi cation of heterogeneous average treatment e ffects which vary with an observable characteristic. We apply such a design to the impact of regional transfers on economic growth where the treatment eff ect varies with the absorptive capacity of targeted regions as measured by the region's human capital stock.