Most Europeans have seen the construction of a building, road or bridge as part of EU-funded projects, festooned with banners or plaques bearing the European flag. However, effects that are easily visible with the naked eye and known to local residents are traditionally difficult to measure and their economic impact hard to evaluate. There is, in fact, no consistent EU-wide monitoring of regional funding at the municipal level.

Our new research investigates the relationship between EU funding policy and small-scale economic development. Our quantitative study follows an innovative approach. For a pilot region in the border area of Germany, Poland and the Czech Republic, we built a comprehensive dataset for the funding periods 2007-2013 and 2014-2020 with information on 119,116 EU-funded projects at the level of 6,571 municipalities. The funding data was then supplemented with data on economic activity in the observed municipalities based on satellite images and, specifically, night-time light emissions.

We see as a result that municipalities that have received more EU funding have shown stronger economic growth. For example, EU-funded infrastructure projects, such as the construction of a bypass or industrial area, have led to better connections with the surrounding communes, which in turn has promoted their attractiveness for businesses and new jobs. Also, economic convergence of living conditions within the pilot region can be observed. Finally, there are positive spillover effects, which means that neighbouring municipalities also benefit from an EU-funded town.

Data-driven analysis is a useful tool to underpin debates on EU spending policies with greater empirical evidence and can help to develop a more tailored cohesion and structural policy on the part of the EU. With the EU's new multiannual financial framework for 2021-2027 set at around €1 trillion – a full third of which earmarked for the regions – analyzing the impact of these funds will be more important than ever. Our work, specifically the innovative satellite-imaging technique, is thus a good starting point for further research into the granular effects of EU public spending.