Understanding EU regional macroeconomic tipping points using panel threshold technique

The primary objective of the European Union has been to bring cohesion among its member states and their respective regions. This has led the European Union to introduce structural funds of various types. Since the last decade, these structural funds have also been used to combat climate change via human capital and green investments. Our main objective is to analyse how these structural funds have impacted EU regional economic growth patterns. We use a novel heterogeneous panel estimator of C-Lasso type, conclude with two groups and find the definitive impact of structural funds towards regional economic growth. We then check the impact of the regional European emission trading system and European pollution registry system on economic growth using a panel threshold regression which uses a latent group structure. In doing so, we find two groups in our sample and the presence of threshold levels both with and without latent groups.