Can Regional Transfers Buy Public Support? Evidence from EU Structural Policy

The theoretical literature suggests that upper-tier governments have an incentive to strategically allocate regional transfers in order to affect the electorate's opinion. This implies that citizens in targeted regions are aware of this intended benefit, and that they reward the benefactor for it. In this paper, the reaction of the citizens is studied, which has not found much consideration in the empirical literature until now. In particular, it focuses on the regional policy of the European Union (EU) as a special case of regional transfer policies with an immense scope and regionally targeted benefits. In this policy area the European institutions, in particular the Commission, act as benefactor and apparently also intend to increase the public support for European integration. The effects of these targeted transfers on the public support for the EU are studied by combining a rich data set on the regional allocation of structural funds payments with opinion survey data. In the empirical section, it is shown that the regional transfers show a positive impact on the public opinion that turns out to be sizeable. An increase of per capita transfers by 100 Euro increases the probability of being supportive of the EU to the extent of approximately 5 to 15%. Moreover, this is the first paper which is able to analyse the chain of causation which leads from regional transfers to public opinion in a more detailed way. In particular, the relevance of the individual's awareness of being a beneficiary is scrutinized. First, it is found that the awareness of being a beneficiary of transfers is conditional on a number of further socio-economic characteristics. Education plays an important role, since higher educated peoples' awareness reacts stronger to regional transfers than lower educated people. Second, the awareness of being supported is generally reected in higher public support for the EU. Informed people have a 4% higher probability of having a positive opinion of the EU. However, this effect is also heterogeneous and depends on the channel of information. A sizeable effect is mainly detected for those citizens who are direct recipients of EU funds. Other information sources (TV, information signs) also have a positive but much smaller effect, whereas a negative effect is found in those cases where the respondent is acquainted with other people who are direct recipients of funds.

Osterloh, Steffen (2011), Can Regional Transfers Buy Public Support? Evidence from EU Structural Policy, ZEW Discussion Paper No. 11-011, Mannheim.