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Understanding the “cash divide”: How the Commission allocates Structural Funds

Using a dataset of EU Structural Funds spending between 2000-2006, Lisa Maria Dellmuth in “The cash divide: the allocation of European Union regional grants“* looks at factors explaining why the European Commission and EU member states gave more of this money to some regions of the “old” EU member states (EU-15) rather than to others.

Summarising past research on this subject (PDF), she reminds that there was “evidence that a relatively Eurosceptic public within a region increases the predicted amount of structural funds this region receives“, implying kind of a political bribe by the national government to (strong) regions in order to get support for its EU policies.

Dellmuth contests this view by arguing that many regions in which EU structural funds are spent don’t even have elected bodies with constitutional relevance but were just bureaucratic structures dealing with the funds, implying so there was no need for national governments to pay particular attention to political majorities.

Hence, it would be necessary to pay more (academic) attention to how the Commission’s own interests and not national or regional politics impact the funds allocation as it is the Commission that is ultimately held accountable at EU-level for how the money is spent.

Dellmuth then goes on to test two different hypotheses:

  1. The Commission gives more money to constitutionally strong regions because these are better lobbyists.
  2. The Commission gives more money to constitutionally weaker regions (i.e. such in more unitary, centralised states) if these were good at spending allocated money in the past because then the Commission knows things would go as expected in the future.

Together with some alternative variables, Dellmuth finds that:

  • Poorer regions tend to get more money than richer regions (as is the intention of the structural funds).
  • The constitutional strength did not explain whether a region would get more money, so lobby strength as implied by previous research did not (seem to) matter.
  • Constitutionally weak regions with better absorption rates (amount of money spent/amount of money allocated) in the previous funding period got more money in 2000-2006.

In summary, Dellmuth concludes from her findings that to some extent the Commission’s decision to give more money to some regions than to others may be guided by the intention to “look good”, i.e. to make decisions that turn out to be successful.

Said differently, this means that two (constitutionally weak) regions that have equal economic indicators will receive significantly different amounts of money given their past spending behaviour. If regions spent less than allocated, the Commission’s decision to provide them with resources they actually couldn’t or wouldn’t handle would look bad.

Polemically shorting the findings of this article: Good spenders are good pupils, and the Commission rewards good regional pupils with more money…

One Response to Understanding the “cash divide”: How the Commission allocates Structural Funds

  1. Pingback: Ignoring contradictory findings: EU structural funds spending | Polscieu

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