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

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.