Hierarchical contracting in grant decisions: ex-ante and ex-post evaluation in the context of the EURegional Policy
AbstractThis paper applies incentive theory to the context of the European Union (EU) Regional Policy. The core instruments of the policy are the Structural Funds, capital grants that ?ow from the European Commission (EC) to Mem- ber States and regional authorities to promote investment and growth at local level. The EU grants need a co-payment by the regional government and do not cover in full the investment cost. We model this situation, similar to several other supra- national or federal contexts, as a simple principal-supervisor-agent model of the investment game between a supranational player (the principal), such as the EC, a non (fully) benevolent regional government (the supervisor), and a private ?rm (the executing agency). We show how the role of providers of additional information, the region (ex-ante) and an evaluator (ex-post) is crucial to reducing the optimal value of the grant and to improving the inef- ?ciencies caused by asymmetric information at the grant decision stage in a federal hierarchy
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Bibliographic InfoPaper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 171.
Length: 24 pages
Date of creation: Jun 2009
Date of revision: Jun 2009
Hierarchical contracting; project evaluation; EU Regional Policy;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-07 (All new papers)
- NEP-CTA-2009-11-07 (Contract Theory & Applications)
- NEP-EEC-2009-11-07 (European Economics)
- NEP-GEO-2009-11-07 (Economic Geography)
- NEP-REG-2009-11-07 (Regulation)
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