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The Potential Impact of EU Cohesion Policy Spending in the 2007-13 Programming Period: A Model-Based

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  • Janos Varga and Jan in 't Veld

Abstract

Summary for non-specialistsThis paper provides an assessment of the potential macro-economic impact of Cohesion Policy using a microfounded dynamic general equilibrium model with semi-endogenous growth and endogenous human capital accumulation and considers the impact of co-financing condition and faster absorption of funds.EU Cohesion policy supports investment in infrastructure, R and D and human capital in Europe's poorer regions. This paper provides a model-based assessment of the potential macro-economic impact of these fiscal transfers using a microfounded dynamic general equilibrium model with semi-endogenous growth and endogenous human capital accumulation. The simulations show the potential benefits of Structural Funds with significant output gains in the long run due to sizeable productivity improvements. Co-financing conditions are found to raise the long term output effects. Delays in spending profiles lead to lower gains.

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Bibliographic Info

Paper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 422.

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Length: 66 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:euf:ecopap:0422

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Keywords: Janos Varga; Jan in 't Veld; The Potential Impact of EU Cohesion Policy Spend Cohesion Policy endogenous growth R and D dynamic general equilibrium modelling;

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References

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  1. Spiros Bougheas & Panicos O. Demetriades & Theofanis P. Mamuneas, 2000. "Infrastructure, specialization, and economic growth," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 506-522, May.
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  3. Sjef Ederveen & Henri de Groot & Richard Nahuis, 2002. "Fertile soil for structural funds? A panel data analysis of the conditional effectiveness of European cohesion policy," CPB Discussion Paper 10, CPB Netherlands Bureau for Economic Policy Analysis.
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  7. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
  8. Angel de la Fuente, 2010. "Testing, not modelling, the impact of Cohesion support: a theoretical framework and some preliminary results for the Spanish regions," UFAE and IAE Working Papers 801.10, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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  12. Laura Bottazzi & Giovanni Peri, 2007. "The International Dynamics of R&D and Innovation in the Long Run and in The Short Run," Economic Journal, Royal Economic Society, vol. 117(518), pages 486-511, 03.
  13. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
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  15. Jan in 't Veld, 2007. "The potential impact of the fiscal transfers under the EU Cohesion Policy Programme," European Economy - Economic Papers 283, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  16. Jan-Egbert Sturm & Gerard H. Kuper & Jakob de Haan,, 1996. "Modelling government investment and economic growth at the macro level: A review," Working Papers 29, Centre for Economic Research, University of Groningen and University of Twente.
  17. Francesca D'Auria & Andrea Pagano & Marco Ratto & Janos Varga, 2009. "A comparison of structural reform scenarios across the EU member states - Simulation-based analysis using the QUEST model with endogenous growth," European Economy - Economic Papers 392, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
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Cited by:
  1. Zsolt Darvas, 2011. "Exchange Rate Policy and Economic Growth after the Financial Crisis in Central and Eastern Europe," Working Papers 1103, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
  2. GHEORGHE ZAMAN & Anca CRISTEA, 2011. "EU Structural Funds Absorption in Romania: Obstacles and Issues," Romanian Journal of Economics, Institute of National Economy, vol. 32(1(41)), pages 60-77, June.

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