Active labour market policies and the efficiency of the European Social Fund in Spanish regions

Abstract

ABSTRACTActive labour market policies and the efficiency of the European Social Fund in Spanish regions. Regional Studies. This paper estimates the determinants of public expenditure on active labour market policies (ALMPs) at the regional level using panel data from a sample of the 17 Spanish regions (1989–2010). The estimations take into account endogeneity, dynamics and spatial dependence among regions. Estimations’ outcome is interpreted with the help of a simple theoretical model of intergovernmental grants. Results reveal that the European Social Fund is not effective in its aim of promoting ALMP expenditure and show that rent-seeking when regions compete to attract funds from a common pool provokes the opposite effect, which is exacerbated in the presence of imitation.