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Allocation of European structural funds and strategic interactions: is there a yardstick competition between regions in the public aid for development?

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  • Lionel VEDRINE

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Abstract

This paper analyzes the relationships between the degree of decentralization of public policy and the emergence of horizontal strategic interactions. We analyze the structural funds allocation process in determining how the structure of governance of cohesion policy a ects the development of strategic interactions between regional governments. We develop a political agency model in which we capture the e ect of the governance structure of public policy on the decision of voters to acquire information on the activities of local governments. We show that the appearance of spatial interactions resulting from a mechanism of 'yardstick competition' is increasing with the degree of policy decentralization. From an empirical analysis of the 2000-06 period, we con firm the proposed model by showing that spatial interactions are more intense when the policy governance is decentralized. This work highlights a new source of spatial interaction in the allocation of grants from institutional determinants in addition to socioeconomic factors studied so far. Keywords: Intergovernmental grant allocation, European Union, Political agency, Yardstick competition, Information acquisition, Spatial econometrics. JEL: C31, C71, D86, H77.

Suggested Citation

  • Lionel VEDRINE, 2012. "Allocation of European structural funds and strategic interactions: is there a yardstick competition between regions in the public aid for development?," ERSA conference papers ersa12p760, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa12p760
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    File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa12/e120821aFinal00762.pdf
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    Cited by:

    1. Peter Schmidt, 2016. "Internal migration and EU regional policy transfer payments: A panel data analysis for the EU-28 member countries," ERSA conference papers ersa16p172, European Regional Science Association.

    More about this item

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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