How to distribute the European Regional Development Funds through a combination of egalitarian allocations: the CELmin

Article  -  Monday, 3 June 2024

Giménez-Gómez, J.M., Salekpay, F. and Vilella, C. (2023): "How to distribute the European Regional Development Funds through a combination of egalitarian allocations: the CELmin", Humanities and Social Sciences Communications

As Solís-Baltodano et al. (2021) figured out, almost a third of the total European Union budget was set aside for the Cohesion Policy during the 2014-2020 period. The distribution of this budget is made through three main structural and investment funds, trying to promote convergence in the level of development of EU countries. Specifically, the authors, by analysing this situation as a claims problem (O'Neill, 1982), find out the claims solution that performs better than the others by reducing inequality and promoting convergence to a greater degree (the Constrained Equal Losses rule). Nonetheless, when using this egalitarian division of losses, regions may not receive any funds. This paper defines a new way to distribute the limited resources of the European Regional Development Fund (ERDF). We propose a compromise between the egalitarian approaches, i.e., we combine the egalitarian division of the funds with an egalitarian division of the losses (what regions do not get). In doing so, our proposal applies the constrained equal losses solution while ensuring a minimum amount is allocated to each region (sustainable bound). Finally, we provide an axiomatic analysis of the new solution and we apply it to the ERDF problem.

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