Decentralization and Regional Economic Performance under the EU Structural Funds Program, 2000-2013

In recent decades, the European Union (EU) has channeled more and more funds through its budget to financially assist regional governments in the EU. Such funds are allocated under the auspices of the Structural Funds Program to establish equalization of fiscal capacity and promote growth among recipient regions. Motivated by the lack of success of previous literature to estimate the effectiveness of the Structural Funds, this paper seeks to determine whether there is a link between public sector decentralization and the effects of the Structural Funds on regional growth. Borrowing insights from the fiscal federalism literature, this paper pays close attention to the incentives that political and fiscal decentralization create for subnational governments to implement the EU Structural Funds. The results have significant implications for our understanding of the ways in which regional governments in the EU have an impact on the effectiveness of EU policy.