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How Does Sub-National Autonomy Affect the Effectiveness of Structural Funds?

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  • Cornelius Baehr

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Abstract

Economic and social cohesion between the EU Member States is one of the explicitly stated goals in the Treaty on European Union. The EU’s Structural Funds as a part of the Union’s regional policies are a mechanism of conditional grants that provides co-financing for growth enhancing investments. Evidence on the effectiveness of the Structural Funds is mixed. While Boldrin and Canova (2001) find no sign of a catch-up effect of regions receiving aid for the period of 1980-1996, Beugelsdijk and Eijffinger (2005) find a positive relationship between (lagged) Structural Funds expenditure and GDP growth at the national level covering 1995-2001. De La Fuente (2002) points to the fact that the inclusion of conditioning variables might also play a crucial role for the results. Ederveen, deGroot and Nahuis (2002) find that Structural Funds themselves have a negative impact on growth. However, the impact turns out to be significantly positive, when interacting variables measuring institutional quality are taken into account. Similarly, Esposti (2005) shows that additional policy measures (spending on CAP) can have significant counter-effects on the effectiveness of Structural Funds expenditure. So far the federal structure of the EU Member States did not attract much attention when the effectiveness of the Structural Funds is considered. Although the EU Commission requires the inclusion of regional authorities and stakeholders in the planning and implementation procedure of programs funded by Structural Funds, one should expect that the performance is better, where the sub-national authorities are more accustomed to pursuing economic policy and implementing programs. This should be the case in states with a higher degree of sub-national autonomy. Using panel-data for a sample of 13 EU Member States from 1960-1995 the effects of Structural Funds on growth are analysed. Then a decentralization index by Stegarescu (2004) is introduced as an interacting variable in order to measure the degree of sub-national autonomy. This paper shows that increasing sub-national autonomy has a significantly positive impact on the effectiveness of the Union’s Structural Funds expenditure.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa06p470.

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Date of creation: Aug 2006
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Handle: RePEc:wiw:wiwrsa:ersa06p470

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Cited by:
  1. Ivo Bischoff & Frédéric Blaeschke, 2013. "Incentives and Influence Activities in the Public Sector: the Trade-off in Performance Budgeting and Conditional Grants," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201320, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  2. Susanne Lechner & Renate Ohr, 2011. "The right of withdrawal in the treaty of Lisbon: a game theoretic reflection on different decision processes in the EU," European Journal of Law and Economics, Springer, Springer, vol. 32(3), pages 357-375, December.
  3. Sacchi, Agnese & Salotti, Simone, 2014. "The asymmetric nature of fiscal decentralization: theory and practice," MPRA Paper 54506, University Library of Munich, Germany.
  4. Chiara Del Bo & Massimo Florio & Silvia Vignetti & Emanuela Sirtori, 2011. "Additionality and regional development: are EU Structural Funds complements or substitutes of national Public Finance?," Working Papers, Centre for Industrial Studies (CSIL) 201101, Centre for Industrial Studies (CSIL).
  5. Ivo Bischoff & Frédéric Blaeschke, 2012. "Window-Dressing and Lobbying in Performance-Budgeting: a Model for the Public Sector," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201212, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  6. Lechner, Susanne & Ohr, Renate, 2008. "The right of withdrawal in the treaty of Lison: A game theoretic reflection on different decision processes in the EU," Center for European, Governance and Economic Development Research Discussion Papers, University of Goettingen, Department of Economics 77, University of Goettingen, Department of Economics.
  7. Mohl, P. & Hagen, T., 2010. "Do EU structural funds promote regional growth? New evidence from various panel data approaches," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 40(5), pages 353-365, September.
  8. Mohl, Philipp & Hagen, Tobias, 2008. "Does EU Cohesion Policy Promote Growth? Evidence from Regional Data and Alternative Econometric Approaches," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 08-086, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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