Influence of EU grants on local government spending behaviours. Case study for Polish rural municipalities.

Agnieszka Kopańska

Grants are important part of municipal budgets. Due to horizontal and vertical imbalance, there are no possibility to resign from this source of financing local governments. According to theoretical model, which is discussed in this paper the impact of grants on municipal spending depend on income and price effect. Previous empirical research presented, that due to political rent-seeking behaviours’ we could suspect also other effects, such as leakage of funds from granted project and increase of other expenditure not related to the project. In this paper we presented panel data analysis for Polish rural municipalities. We tried to find if and how investment grants from European Union influence other-operational spending of municipalities. The results are not obvious, but analysed model presented that potential impact of EU investment grants on operational spending policy is very limited.