Place-Based Policies and Decline of Local Political Support: Case of EU Funding

• In Event: Poster Session: Political Economy

Abstract

Do place-based policies increase political support among residents for those who delivered? Literature is ambivalent about the economic impact of place-based policies, but works on pork-barrel politics and targeted regional transfers assume that policies such as spatially targeted spending are politically popular. However, while we know cash and welfare programs can buy votes, we have less knowledge on if bridges and local economic empowerment programs can gain political loyalty of the locals. Limited existent research suffers from selection bias and confounding factors that are inevitably associated with place-based political transfers that are frequently targeted at lagging or politically sensitive regions.

Taking advantage of the discontinuous eligibility criteria for the European Structural and Investment Fund based on regional GDP per capita in the United Kingdom, I analyzed the support for the EU among the comparable people in the areas with different levels of EU funding availability for place-based policies, using a Spatial Regression Discontinuity Design.

I found that people with high socioeconomic status and high educational attainment in the targeted areas are less likely to support the EU, happier with the UK’s decision to exit the EU, and tend to believe that the EU made the UK worse off, compared to the corresponding groups in the non-targeted areas. I observed mixed results for less-skilled groups, and there was no observed effect for retired people and people with intermediate jobs. People in the targeted areas did not show any difference vis-a`-vis those in the non-targeted areas in terms of anti-immigrant sentiments, patriotism, cultural conservatism, or economic anxiety. I observed particularly significant negative effects of the EU funding on the support for the EU among the readers of regional newspapers, most of which had a pro-Brexit editorial stance.

Given the paradoxical and unconventional result, I complimented the analysis with Genetic Matching to match comparable people in different locations and see if different types of EU- funded projects influenced local support for the EU differently. The results show that the negative effects on EU favorability were particularly large when the local area had local development programs or environmental projects funded by the EU. EU-funded Employment and training support, as well as the support for small and medium-sized enterprises, had relatively weak effects, and research and development programs in the area did not have any impact on the support for the EU.

The findings suggest that a relatively educated class in the area often see visible pork-barrel projects they do not directly benefit as a waste of money, and their exposure to local media, which could cover particular projects critically, would accelerate this tendency. The results are counter-intuitive and against conventional theories, but they are in line with the anecdotal evidence about the EU funding in Eastern Europe, and they may explain relatively limited and declining use of pork-barrel politics in advanced economies, despite the seemingly significant political appeal of such place-based transfers.

Author

• Makoto Fukumoto, UC Berkeley