Determinants of the use of European Structural and Investment Funds

Abstract

We investigate the determinants of the effective use of European Structural and Investment Funds. We use a newly constructed database of the 1024 programmes from the last two programme periods that started in 2007 and 2014, respectively. Our results show that virtually all programmes fail to meet the initial deadline and need the extension period to be able to spend the funds initially allocated. About 45% of EU funds allocated are not used by the initial deadline and a tenth of the programmes end up not using over 10% of the funds. Our econometric analysis shows that beyond institutional framework measures of accountability, law and order, corruption and public officials’ attitudes, education and management capacity are key determinants in the efficient use of fund allocation. These findings are in line with previous work documenting that, as in the private sector, management capacity plays an important role in explaining government efficiency. In such circumstances, implementing measures that help bureaucracies deal with the lack of management skills and processing capacity – such as outsourcing fund management – may improve the efficient use of EU funds.

KEYWORDS:

• Government efficiency
• European funds
• economic policy
• management

JEL CODES:

• F35
• H11
• O52

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 A recent strand of the literature has shown that management capabilities significantly impact private sector efficiency (Lewis 2005; Bloom and Van Reenen 2007; Bloom et al. 2010; Bloom and Van Reenen 2010; Bloom, Eifert et al. 2012; Bloom, Sadun, and Van Reenen 2012).

2 This rate refers to the contribution that EU funding makes to a programme. It is usually subject to a maximum threshold established by the European Commission.

3 Alonso, Aguirre, and Santander (2019) highlight the evolution of development financing, moving from 77% of official sources in 1970 to 14% in 2017.

4 These include the availability of the direct management option, and the measuring of execution not by declaring expenses but my measuring results through milestones and objectives’ achievement.

Additional information

Funding

This work was supported by International Research Project EUMODFRAUD (EU proposal 878513 – Hercule III 2019 Legal Training and Studies, HERCULE-2019-LT-AG) and Ministerio de Ciencia e Innovación [grant number PID2020-114797GB-I00].

Notes on contributors

David Blanco-Alcántara

David Blanco-Alcántara a professor on Corporate Finance, is a researcher on board Network and financial institutions. Among his recent studies are Board networks as a source of intellectual capital for companies: Empirical Evidence from a Panel of Spanish Firms (Management Decision, 2020) and How Do Banks and Investment Funds Affect Family Risk-Taking? Evidence from the Financial Crisis (Ed. Palgrave Macmillan, Contemporary issues in banking: regulation, governance, and performance).

Jorge Gallud Cano

Jorge Gallud Cano, a professor of accounting, writes on corporate governance and disclosure policies. Among his recent articles are Have European Banks Maintained their Payout Policy During the Crisis? The Role of Scrip Dividends (International Journal of Finance & Economics 2020) and European Banks' Legal Provisions and Financial Crises: The Influence of Corporate Governance and Institutional Environment (Czech Journal of Economics and Finance 2020).

Florencio Lopez-de-Silanes

Florencio Lopez-de-Silanes is Professor of Finance, and Dean of Academic Strategy at SKEMA Business School in France. He has a PhD in Economics from Harvard University. His research interests and main publications are in governance, law and finance, and the regulation of financial markets, and corporate finance in general.