How does space affect the allocation of the EU rural development policy's expenditure? An econometric assessment

This paper focuses on the main drivers of the distribution of the Rural Development Policy's expenditure throughout the EU. Ex-post funds distribution across EU NUTS3 regions is considered. Three effects are admitted as major drivers: the "country effect"; the "rural effect" (i.e., the more rural a region the larger the amount of support it is expected to receive); the "pure spatial effect" (i.e. the influence of bordering regions and, in particular, of their degree of rurality). These effects are estimated adopting alternative spatial model specifications: spatial Durbin model, SEM and SAR model. Results differ across alternative specifications and definitions of rurality, but the prevalent evidence suggests that rurality matters in a counterintuitive direction, while also neighbouring regions play a role.