Cross-border flows operated through the EU budget: an overview

Summary:

The purpose of this paper is to offer a quantitative contribution to the third strand of this literature by providing an estimate of the magnitude and main drivers of cross-border flows operated through the EU budget. Although the many dimensions of divergence (e.g. historical, political, fiscal, institutional, etc.) with the US and other federations are well identified in the above mentioned literature, this contribution is narrower in its scope and focuses on the estimation of net cross-border flows. At the same time, this is performed at a greater level of detail compared to other similar studies (e.g. Mikko M., 2006; Manasse P. et al., 2013). Notably, it goes beyond the country-by-country perspective and proposes a measure of cross-border flows for the EU as a whole. Second, it makes use of a richer dataset on EU budgetary execution allowing the role played by different funds and headings to be disentangled. Finally, it differentiates between 'crisis' and 'normal' times by using two different data-sets for the US.

The data-set for the EU includes information by major categories of revenue and expenditure for 2007-13. This period is long enough to smooth out annual fluctuations in budgetary implementation and has the advantage of coinciding with the last Multiannual Financial Framework (MFF) 2007-13. For the calculation of cross-border flows in the US, data on federal tax collection and spending by State and category are taken from the annual reports of the Internal Revenue Service (taxes) and the US Census Bureau (spending), with deficit neutrality imposed in the long-term (pre-crisis) but allowing the shortterm impact of federal borrowing on cross-border flows to be analysed during the crisis.

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