Matthew Walsh

Title:  The Role of Decentralization and Bureaucratic Quality in Absorbing EU Structural Funds: Evidence from Bulgaria and Romania

The European Union’s Structural Funds constitute perhaps the largest system of intergovernmental investment grants ever devised. The thesis examines the factors that determine efficient absorption of these funds. It first uses regional-level data to determine the main predictors of absorption across all EU member states. It finds that perception-based measures of subnational government quality – but not indicators of public procurement quality – are most strongly associated with absorption across and within member states. Government quality also matters most in regions where subnational beneficiaries are implementing a large share of EU-funded projects. The study then asks why Bulgaria absorbed EU funds at higher rates than Romania in the 2007-2013 funding period. Using an independently constructed dataset on demographics, municipal finances, EU-funded projects, and local elections in both countries, I find that local tax capacity positively predicts absorption in Romania, but it has no association with absorption in Bulgaria. I also find that income-based disparities between high- and low-absorbing municipalities diminished over time in Bulgaria, but not in Romania. A qualitative investigation of EU program evaluation reports strongly suggests that the difference in absorption in both countries is explained not by varying levels of decentralization, but by a more coherent structure for managing EU funds and greater investment in building capacity of municipal-level public officials. The principal conclusion is that decentralization can improve absorption in low-capacity environments only if countries invest first in capacitating central-level authorities and then transfer this competence and policy knowledge down to the local level. 

First Thesis Advisor:  Anthony Levitas

Senior Fellow in International and Public Affairs

Second Thesis Advisor:  Professor J. Nicholas Ziegler

Professor of International and Public Affairs (Research), Watson Institute