The politics of State aid in the European Union: explaining variation in aid allocation among Member States

Marco Schito

Journal of Public Policy, 2021, vol. 41, issue 2, 277-306

Abstract: Despite widespread acknowledgement of the dangers of selective subsidisation, government support to business remains common practice. Looking at State aid allocations in the European Union, the article explores why some countries grant more aid than others. Scholarship has failed to address this issue in a comprehensive manner, focusing either on the responsiveness of governments to voters’ preferences or on the use of subsidies as a way to ensure the political survival of the incumbent. Using the lens of distributive politics, this article proposes a more comprehensive account of State aid politics that joins these two perspectives. By means of time-series cross-section regression analysis, it tests how aid allocation depends on the attainment of policy goals (namely correction of market failures), electoral pragmatism and responsibility towards international commitments. The results show that politicians are indeed electorally pragmatic, but not necessarily responsive, due to institutional constraints and international commitments.

Date: 2021
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