The European Union budget is distributed primarily in the form of intergovernmental grants to sub-state governments, which invest the grants in local projects. Transfers are allocated under the auspices of the European structural funds. This article assesses the causal links between electoral incentives on the recipient side, European funding goals, and local grant allocation. Tobit regressions of the allocation patterns in 419 local districts in Germany for the period 2000-6 suggest the following: although recipient sub-state governments enjoy substantial discretion in selecting projects, their distributive choices are largely in accord with European goals. As theoretically predicted, however, there is robust evidence that sub-state governments' electoral concerns distort the local allocation of structural funds.

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Extensive research suggests that political factors bias the domestic allocation of the European Union (EU) Structural and Investment Funds (SIF) in ways that may not be in line with EU goals. This paper offers the first systematic and comparative analysis of the role of domestic electoral institutions in shaping politicians' incentives to use European funds to buy votes. Drawing on theories of distributive politics and SIF implementation, the paper argues that electoral institutions provide politicians with incentives to use at least a part of the SIF to buy votes, and that the vote-seeking behavior of national governments is relatively unconstrained by the bargaining power of the European Commission or regions. The empirical results from a statistical analysis of SIF allocations within Italian and French NUTS3-level regions endorse the argument, with implications for the effectiveness of the SIF in promoting sustainable and inclusive development in European regions. Acknowledgements

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