EU Funds Assistance and the Quality of Institutions in the Member States: The twofold relationship

Abstract

A question how effective European Union Cohesion Fund and Structural Funds are in promoting economic growth and speeding up the process of convergence has attracted an interest of international community and a broad circle of scientists. While some authors claim that only for countries with the “right“ institutions these funds bring benefit, some research on international aid shows that financial assistance is likely to reduce quality of institutions in the recipient countries. This thesis is exploring how the absorption of EU Funds support and the quality of institutions in EU Member States affect each other by first measuring how great is the impact of public institutions quality on the EU Funds absorption (namely, the EU Funds actually received compared to the amount allocated) in a cross-country perspective, and then conducting informant interviews to find out possible effects of the EU funding (absorbed via EU co-financed projects) on institutional quality in the Member States. Study combines both quantitative and qualitative research methods thus showing that each additional increase in quality of public institutions raised absorption of EU funds by 0.59 in the scale, given 2007- 2013 EU Funds support period; but paradoxically EU funds just as other development aid were in a risk of legal corruption and similar practice, having negative effects on institutional quality, when EU-supported projects issue contracts for suppliers via public tendering. Results from the study can be beneficial for rethinking EU Funds management strategy and implications, and also contribute to the debate on overall impact of foreign aid interventions on the quality of government.