We investigate the determinants of the effective use of European Structural and Investment Funds. We use a newly constructed database of the 1024 programmes from the last two programme periods that started in 2007 and 2014, respectively. Our results show that virtually all programmes fail to meet the initial deadline and need the extension period to be able to spend the funds initially allocated. About 45% of EU funds allocated are not used by the initial deadline and a tenth of the programmes end up not using over 10% of the funds. Our econometric analysis shows that beyond institutional framework measures of accountability, law and order, corruption and public officials’ attitudes, education and management capacity are key determinants in the efficient use of fund allocation. These findings are in line with previous work documenting that, as in the private sector, management capacity plays an important role in explaining government efficiency. In such circumstances, implementing measures that help bureaucracies deal with the lack of management skills and processing capacity – such as outsourcing fund management – may improve the efficient use of EU funds.
