An evaluation of EU regional policy. Do structural actions crowd out public spending?

Motivated by the lack of success of previous studies trying to estimate the impact of the European Cohesion Policy, this paper brings an unexplored issue to light: transfers that are intended to finance public investment in key areas for growth might be crowded-out by subsidized governments to alternative uses. In fact, using annual data from fifteen member countries (1993–2005), we conclude that public investment in the member countries makes up around 60% of the increase in EU funds. The limited role of the European Commission in the allocation of the Funds could partially explain this result.