Municipal Sustainability Influence by European Union Investment Programs on the Portuguese Local Government

The assessment of the impact of European Structural and Investment Funds (ESIF) on Portuguese local government and which factors determine it is important given the magnitude of funds involved. As part of this larger question, this paper considers whether the holistic sustainability of local authorities—as measured by a Council Sustainability Index—can influence the impact of ESIF on the performance of Portuguese councils and which factors best explain these performance differences. Using a geometric distance function jointly with the Hicks-Moorsteen index, we investigate and present a conclusion on the differential impact of ESIF on sustainable and non-sustainable Portuguese councils over the period 2000 to 2014. Our findings also suggest that ESIF should continue fostering economic and social development at the local level regardless of council size or regional location since overall development will flow from this economic and social structural adjustment strategy.