Advanced Search
MyIDEAS: Login to save this paper or follow this series

Hierarchical contracting in grant decisions: ex-ante and ex-post evaluation in the context of the EU Structural Funds

Contents:

Author Info

  • Michela Cella

    (University of Milan-Bicocca)

  • Massimo Florio

    (University of Milan)

Abstract

This paper presents a simple principal-supervisor-agent model of the investment game between a supranational player (the principal), such as the European Commission, a regional government (the supervisor), and a private firm (the executing agency) . The EC is a benevolent social welfare maximiser, the regional government has an objective function that combines private benefits to politicians and the welfare of their constituency, the agent is a utility maximiser. The latter can be of a high or low efficiency type, and the operative cost, observable ex post, depends upon this binary technology and managerial effort, also unobservable. The EC offers a matching capital grant to the firm (as it does with the EU Structural Funds), intended to cover part of the investment cost of an otherwise unprofitable project. The regional government offers the remaining share of the subsidy. If the firm claims to be inefficient, the EC can send with some probability an ex-post evaluator and there is a penalty if she discovers that it is of the efficient-type. Moreover the regional government can collaborate with the EC to disclose additional information it may have on the firm, but it needs to be given a reward not to collude with the firm, that is in turn willing to offer a private benefit to the regional government to conceal unfavourable evidence. We show that the role of these providers of additional information is essential to reducing the value of the grant and in improving the inefficiencies caused by asymmetric information and the grant decision stage. The paper suggests that the EC should include ex-post evaluation, currently provided by the Structural Funds regulations, within regional planning contracts for infrastructure investment; and that regional governments should be offered a reward for disclosing additional information on the firm technology (ex-ante supervision).

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://services.bepress.com/unimi/economics/art22
Download Restriction: no

Bibliographic Info

Paper provided by Universitá degli Studi di Milano in its series UNIMI - Research Papers in Economics, Business, and Statistics with number unimi-1059.

as in new window
Length:
Date of creation: 16 Jul 2007
Date of revision:
Handle: RePEc:bep:unimip:unimi-1059

Note: oai:cdlib1:unimi-1059
Contact details of provider:
Postal: Via Conservatorio 7 - 20122 Milano
Phone: +39 02 503 16486
Fax: +39 02 503 16475
Web page: http://services.bepress.com/unimi
More information through EDIRC

Related research

Keywords: Hierachical contracting; evaluation; EU Structural Funds;

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ginés Rus & M. Socorro, 2010. "Infrastructure Investment and Incentives with Supranational Funding," Transition Studies Review, Springer, vol. 17(3), pages 551-567, September.
  2. Massimo FLORIO & Silvia VIGNETTI, 2009. "Building a bridge across CBA traditions: the contribution of EU Regional Policy," Departmental Working Papers 2009-16, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bep:unimip:unimi-1059. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.