Drivers of NextGenerationEU Transfers to Spanish Municipalities: Political, Fiscal, and Administrative Determinants

How do political alignment, local need, and administrative/fiscal capacity shape the allocation of NextGenerationEU (NGEU) funds to Spanish municipalities? Building on fiscal federalism and distributive politics, we use a novel municipality-level dataset of NGEU allocations in Spain to examine three questions: whether higher quality of local government and stronger revenue autonomy increase the probability of receiving funds; whether greater socioeconomic disadvantage predicts higher allocations; and whether political co-partisanship with the central government raises awards and conditions the effect of capacity. Methodologically, we estimate logistic and linear models for receipt and intensity of funding, deploy multilevel (hierarchical) models with provincial and regional clustering, and test interactions between alignment and capacity to probe joint effects within Spain’s multilevel governance. Key (expected) findings are threefold: municipalities with higher administrative quality and stronger fiscal capacity are more likely to win NGEU funds; need is positively associated with allocations; and political alignment confers an advantage and may amplify the returns to capacity. These results would reconcile NGEU’s performance-oriented logic with its redistributive aims, clarifying equity–efficiency trade-offs in the post-pandemic recovery. The paper contributes theoretically by integrating capacity, need, and alignment into a unified account of NGEU multilevel governance.