Distributing the European structural and investment funds from a conflicting claims approach

Abstract

In order to support economic development across all European Union regions, €351.8 billion –almost a third of the total EU budget– has been set aside for the Cohesion Policy during the 2014–2020 period. The distribution of this budget is made through five main structural and investment funds, after long and difficult negotiations among the EU member states. This paper analyzes the problem of allocating the limited resources of the European Regional Development Fund as a conflicting claims problem. Specifically, we attempt to show how the conflicting claims approach fits this actual problem, and we propose alternative ways of distributing the budget via (i) claims solutions or (ii) the imposition of bounds (guarantees) to each of the regions. By applying this approach we also show that there is a claims solution that performs better than the others by reducing inequality and promoting convergence to a greater degree. It is clear that political bargaining will always be part of the allocation process. However, having an intuitive initial proposal may help politicians to find the best agreement. To that effect, we propose the use of a claims solution as a way to find an initial proposal for future policy changes concerning the allocations of the EU structural funds.