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Rationing methods for allocating the European Union’s rural development funds in Poland

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Abstract

In this paper, we evaluate the applicability of the bankruptcy and the relevance factors methods to the allocation of structural policy budgets using Polish Rural Development Program as a practical example. Our results demonstrate that the main problem with the bankruptcy approach used for policy budget allocation is that project claims are not directly related to project importance. Highly significant programs with small claims are potentially penalized by the proportional solution or by the Constrained Equal Losses solution, while projects of low importance and small claims may be fully funded using the Constrained Equal Awards solution. The relevance approach, on the other hand, is highly dependent on the measure computed using expert opinions. This measure is not influenced by claims. Thus, given reliable expert assessments, the relevance factors method appears advantageous to the bankruptcy approach. This method is also far superior to the less formal methods currently used by decision-makers.

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Fig. 1

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Notes

  1. The analysis of agricultural reform in the European Union, including a shift towards rural development policy, has been addressed in many studies e.g. Hodge (2003) and Daugbjerg (2009).

  2. The Common Agricultural Policy of the EU accounts for about 40% of the total EU budget. Many observers (e.g. Nedergaard 2006; Jonsson 2007) suggest that agricultural subsidies are largely a consequence of lobbing organized by beneficiaries.

  3. There is a growing criticism in the literature of too complicated models, based on large simulations proposed for policy studies and application (see Bankes 1992; Walker 2000; Munda 2004).

  4. Because the number of experts was 20 and the highest possible weight for a single program was 540. In our case the results are not very diversified (the average 257.7 and standard deviation of 34.3). More diversified assessments could differentiate the results more strongly.

  5. The choice of threshold of 5 was also justified by the values of Gini indexes calculated for allocation of fair measure with different thresholds, presented in Sect. 3.3. Over the threshold of 5 the largest changes in the allocation are visible.

  6. In this section we consider a fair measure with the threshold of 5. The result of changes of the threshold is discussed in Sect. 3.3.

  7. Just like in case of allocation, the largest changes are visible over the threshold of 5.

  8. The authors prove that the fair measure applied to an incidence function is in fact the Shapley value applied to the associated cumulative incidence function.

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Acknowledgements

The authors gratefully acknowledge two anonymous reviewers for their useful detailed comments that allowed us to improve the paper. This work was supported by the Polish National Science Center (Grant number 2013/11/B/HS4/00685).

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Authors and Affiliations

  1. Department of Sciences and Technological Innovation, University of Eastern Piedmont, Viale Teresa Michel 11, 15121, Alessandria, Italy

    Vito Fragnelli

  2. Faculty of Economics and Social Sciences, Poznań University of Life Sciences, 28 Wojska Polskiego St., 60-637, Poznan, Poland

    Ewa Kiryluk-Dryjska

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  1. Vito Fragnelli
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Correspondence to Vito Fragnelli.

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Fragnelli, V., Kiryluk-Dryjska, E. Rationing methods for allocating the European Union’s rural development funds in Poland. Econ Polit 36, 295–322 (2019). https://doi.org/10.1007/s40888-018-00140-6

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