Conditionalities and the performance of European structural funds: a principal-agent analysis of control mechanisms in EU cohesion policy

In the context of debates on the performance of EU Cohesion policy, this paper considers how the EU 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 EU programmes over the 2000-13 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. From a policy perspective, 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.