Winners and Losers in EU State Aid Policy

Who gains and who loses from the European Union's state aid policy? Using data published by the Competition Directorate from 1992 to 2007, I employ pooled time series analysis to understand the motives behind state aid allocations and then interpret the findings in light of the political relationship between Member States and the Commission. Demand for aid is shaped by national macroeconomic and institutional characteristics. Governments then bargain with the Commission to allocate aid. As a result, the Commission finds itself in a delicate balancing act as controller of state aids and as an institution subject to the political power of member government.