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On the Economic Effects of a Reallocation of EU Cohesion Policy Expenditures

Author

Listed:
  • Stefan Jestl

    (The Vienna Institute for International Economic Studies, wiiw)

  • Roman Römisch

    (The Vienna Institute for International Economic Studies, wiiw)

Abstract

This paper analyses the economic effects of a reallocation of Cohesion Policy expenditures across EU countries. We evaluate a shift from stronger (i.e. older) Member States to less-developed EU economies (i.e. CEE countries) and vice versa. On top of that, we also assess the effects of a general reduction in the Cohesion Policy budget. For evaluation, we construct a demand-driven macroeconomic model which spans country models of 21 EU economies and is calibrated based on empirical data for the period 1995-2018. Our results suggest that a shift of Cohesion Policy funds to more (less) developed countries would result in a higher (lower) overall economic performance. However, the reallocation would affect economic outcomes in EU economies unevenly. In addition to direct effects on demand and production, it is pivotal to take into account indirect effects via trade as well. As a result, Cohesion Policy seems to be confronted with a trade-off between long-run convergence and short-run economic performance.

Suggested Citation

  • Stefan Jestl & Roman Römisch, 2020. "On the Economic Effects of a Reallocation of EU Cohesion Policy Expenditures," wiiw Working Papers 183, The Vienna Institute for International Economic Studies, wiiw.
    • Handle: RePEc:wii:wpaper:183
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    References listed on IDEAS

    as
    1. Rodríguez-Pose, Andrés & Novak, Katja, 2013. "Learning processes and economic returns in European Cohesion policy," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 25, pages 1-20.
    2. Mohl, P. & Hagen, T., 2010. "Do EU structural funds promote regional growth? New evidence from various panel data approaches," Regional Science and Urban Economics, Elsevier, vol. 40(5), pages 353-365, September.
    3. Josef Steindl, 1990. "Stagnation Theory and Stagnation Policy," Palgrave Macmillan Books, in: Economic Papers 1941–88, chapter 9, pages 107-126, Palgrave Macmillan.
    4. Varga, Janos & in 't Veld, Jan, 2011. "A model-based analysis of the impact of Cohesion Policy expenditure 2000–06: Simulations with the QUEST III endogenous R&D model," Economic Modelling, Elsevier, vol. 28(1), pages 647-663.
    5. Neculai-Cristian Surubaru, 2017. "Administrative capacity or quality of political governance? EU Cohesion Policy in the new Europe, 2007–13," Regional Studies, Taylor & Francis Journals, vol. 51(6), pages 844-856, June.
    6. Marco Percoco, 2017. "Impact of European Cohesion Policy on regional growth: does local economic structure matter?," Regional Studies, Taylor & Francis Journals, vol. 51(6), pages 833-843, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Cohesion Policy; Macroeconomic Models; Reallocation;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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