Balado-Naves, Roberto, Garcia-Valinas, Marian and Zaporozhets, Vera (2026) Bargaining over EU Budgetary Items: Trade-offs and Marginal Valuations. TSE Working Paper, n. 26-1752

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Abstract

This paper analyzes the determinants of the EU budget bargaining process across different expenditure sections for each EU member state. The central hypothesis is that the countries may accept lower allocations in one budget section in exchange for higher shares in others. To explore this, we first develop a theoretical bargaining model that captures member states’ preferences across budgetary items. We then empirically test the model using an unbalanced panel dataset covering EU member states from 1976 to 2020, estimating the marginal rate of substitution between different types of expenditure. The results reveal significant trade-offs among certain budgetary items. On average, structural funds emerged as the most valued expenditure category, followed by agricultural and natural resources policies.