The mechanisms linking electoral institutions and economic geography to policy outcomes are examined via two cases: a subsidy program to support Cognac producers in France and a subsidy for Austrian wine makers. The two programs exhibit different characteristics largely because of the respective countries’ electoral institutions and economic geography. In France, where Cognac producers are geographically concentrated and legislators are elected via a majority-plurality electoral system, the subsidy is selectively targeted to only those producers in the Cognac designated region. In contrast, the Austrian subsidy is available to all farm-gate wine merchants regardless of their geographic location. Farm-gate wine merchants, who sell wine at the place of production, are spread across more than forty-five thousand hectares in Austria. Subsidizing this geographically diffuse group is politically expedient for parties competing in elections held via proportional rules and closed-party lists, as in Austria. Both subsidy programs violated the European Union rules on State Aid, which limit member-states’ ability to assist domestic producers. Yet despite EU State Aid rules, some governments choose to subsidize domestic producers. Novel evidence shows that countries’ electoral institutions and economic geography predict the likelihood of governments’ compliance with EU state aid rules.