Conditionalities and the Performance of European Structural Funds: A Principal-Agent Analysis of Control Mechanisms in European Union Cohesion Policy

Bachtler J. and Ferry M. Conditionalities and the performance of European Structural Funds: a principal-agent analysis of control mechanisms in European Union cohesion policy, Regional Studies. In the context of debates on the performance of European Union cohesion policy, this paper considers how the European Union has used control mechanisms to influence the use of Structural Funds by member states. Using the principal-agent model, this paper examines empirically three case studies of conditionalities applied to the absorption of funding (decommitment rule), outcomes of interventions (performance reserve) and targeting of expenditure (earmarking) in European Union programmes over the 2000-2013 period. The findings reveal different levels of effectiveness of the three conditionalities, attributable to the differential scope for trade-offs during the regulatory negotiations, external pressure and principal self-interest. The paper discusses an effectiveness threshold for introducing controls, the tensions between multiple conditionalities and the limitations of top-down control mechanisms in influencing agent behaviour.