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 effect, assuming that it does not vary in a systematic way across units. We suggest a regression discontinuity design which allows for semiparametric or nonparametric identication of heterogeneous average treatment effects which vary with an observable characteristic. We apply such a design to the impact of regional transfers on economic growth where the treatment effect varies with the absorptive capacity of targeted regions as measured by the region's human capital stock.