The Structural Funds of the European Union
Edited by Massimo Florio
Chapter 6: Economic Evaluation and Incentives in Transport Infrastructure Investment
Ginés De Rus INTRODUCTION Investment in public infrastructure is still going to be one of the priorities of the Member States and the European Union in the next decade (European Commission, 2001). The European Commission co-ﬁnances national and cross-frontier infrastructure projects through the Structural Funds and the Cohesion Fund. The rationale of devoting European public funds to this aim is to help ‘convergence’, ‘regional competitiveness and employment’, and ‘European territorial cooperation’. The total funds allocated to achieve these objectives are €307.6 billion1 for the period 2007–13 and distributed through the ERDF, ESF and Cohesion funds (European Council, 2005). One of the characteristics of this co-ﬁnancing by the European Commission is the no repayment nature of these funds, having the eﬀect of reducing the cost of the infrastructure projects from the perspective of the member countries receiving the community funds. In a context of asymmetric information and diﬀerent objectives, the relationship of the European Commission and the Member States cannot be modelled in a conventional cost–beneﬁt analysis framework, where projects are evaluated with demand forecasts (imperfect information) but symmetric information is implicitly assumed, and where the central planner select projects according with the expected net present value in the beneﬁt of the European Union as a whole without signiﬁcant conﬂict of interests. The reality in the European Union with a multi-government setting, information asymmetries and conﬂicting interests requires a diﬀerent approach in which incentives are explicitly accounted for....
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