The relation between the index of economic freedom and good governance with efficiency of the European Structural Funds

Abstract

This research evaluates the management efficiency of the European Structural Funds according to whether their productive orientation is based on employment or on economic and social development. The data refers to 2000-2020 for the 28 EU countries. The paper includes an analysis of the influence of the country's governance and economic freedom on the production function associated with the funds received. The results show that there is a technological gap between groups of countries defined by their goodness of governance. On the other hand, there is a positive relationship of economic freedom and the efficiency scores of the countries.

European Structural and Investment Funds (ESIFs) and Regional Development across the European Union (EU)

“…In the realm of methodological approaches to evaluating fund efficiency, our findings underscore the criticality of employing sophisticated analytical frameworks such as Data Envelopment Analysis (DEA) and spatial econometrics (Gómez-Gallego et al 2022;Gouveia et al 2021). This resonates with the broader literature, which advocates for nuanced methodological paradigms to capture the complex interplay between fund allocation, utilization, and regional economic outcomes (Boadway and Shah 2009).…”

“…In assessing the efficiency of fund allocation and utilization, various studies emphasize the profound impact of governance quality and economic freedom. Studies like those by Gómez-Gallego et al (2022) and Gouveia et al (2021) demonstrate that countries with higher governance-quality and economic-freedom scores tend to utilize European Structural and Investment Funds (ESIFs) more efficiently, which in turn enhances regional economic development. Rodríguez-Pose and Garcilazo (2015) reinforce this, finding that government quality serves as a crucial determinant of economic growth and moderates the efficiency of Structural and Cohesion Fund expenditure (Rodríguez-Pose and Garcilazo 2015).…”

“…The interconnection between governance quality, economic freedom, and the efficiency of structural fund management has emerged as a critical area of inquiry, with research by Gómez-Gallego et al (2022) elucidating how improvements in these areas can significantly enhance fund management efficiency and regional economic development (Gómez-Gallego et al 2022). This body of work aligns with the theoretical frameworks posited by North (1990) and Acemoglu and Robinson (2012), who argue that institutional quality is a determinant of economic performance and policy outcomes (North 1990;Acemoglu and Robinson 2012).…”

“…This analysis underscores the critical role of effective tax administration as a component of governance that directly influences economic health and stability. When comparing the findings from Anastasiou et al (2022) with those of Gómez-Gallego et al (2022), both studies emphasize the critical role of governance mechanisms in influencing economic outcomes within the European Union. Anastasiou et al focus on the effectiveness of tax administration and its direct impact on macroeconomic stability, showing that efficient tax systems are crucial for maintaining fiscal balance and economic resilience across European nations.…”

“…The multifaceted nature of ESIF's impact on regional development necessitates a comprehensive understanding of their efficiency, the dynamics of regional disparities and convergence, the influence of governance quality and economic freedom on fund management, and the challenges surrounding fund absorption and management. Previous research has underscored the significance of methodological rigor in evaluating fund efficiency, highlighting the utility of Data Envelopment Analysis (DEA) and spatial econometrics as sophisticated tools for assessing the performance of decision-making units in utilizing ESIFs (Piattoni 2016;Gómez-Gallego et al 2022;Gouveia et al 2021;Papageorgiou et al 2021aPapageorgiou et al , 2021bAnastasiou and Marietta 2020).…”