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Macro-regional evaluation of the Structural Funds using the HERMIN modelling framework

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  • John Bradley

    ()

  • Edgar Morgenroth

    ()

  • Gerhard Untiedt

    ()

Abstract

The structural fund interventions play a crucial role in improving the social and economic cohesion of the EU. A particular focus of the structural funds is on those regions that lag behind to the extent that their GDP per capita is below 75 per cent of the EU average ? Objective 1 regions. In 1999 these regions accounted for 25 per cent of total EU population, and in general they are poorly endowed in a number of areas, such as infrastructure, human capital, and modern high productivity industries and services. As a consequence, they tend to have higher rates of unemployment. The amount of investment that is funded though the structural funds by the EU is substantial (?103 billion over the period 1994 to 1999 for Objective 1 regions). Given their size and significance, EU legislation requires the appraisal of the structural funds. However, while systematic monitoring and evaluation frameworks are available at the national level and at the project level, a rigorous and systematic method for quantifying the socio-economic impacts of structural fund interventions on the regional economies has not been developed to the same extent. Thus, policy-makers seldom have access to accumulated research on the macroeconomic and macro-sectoral performance at a regional (NUTS II) level, which would allow them to assess the overall impact of the structural funds. One modelling framework ? HERMIN - has been widely applied to Structural Fund analysis at the national level (Greece, Ireland, Portugal, Spain, Estonia, Latvia) and macro-regional level (East Germany and Northern Ireland). In this paper we review the theoretical foundations of this modelling approach, outline its application and highlight the results from the application of the HERMIN modelling framework to structural funds evaluation. This review will highlight not only the strengths of the approach but also the weaknesses and areas for further research. The theoretical underpinning of the HERMIN model is that of a small open economy model with a Keynesian role for domestic demand. The HERMIN framework is designed as a macroeconometric model composed of four sectors: manufacturing (a mainly traded sector), market services (a mainly non-traded sector), agriculture and government (or non-market) services. This level of disaggregation is the minimum necessary to identify the key sectoral shifts in a developing (regional) economy over the years of the Structural Funds programme. The model incorporates the mechanisms through which the Objective 1 national or regional economy is inter-connected to the external world, and most importantly it incorporates mechanisms through which the Structural Funds impact on the economy in the short and long-run. It therefore captures not only the short run Keynesian demand effects but also the long-run supply side effects.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa03p313.

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Date of creation: Aug 2003
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Handle: RePEc:wiw:wiwrsa:ersa03p313

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  1. Wei Fan & Frederick Treyz & George Treyz, 2000. "An Evolutionary New Economic Geography Model," Journal of Regional Science, Wiley Blackwell, vol. 40(4), pages 671-695.
  2. Bradley, John & Whelan, Karl & Wright, Jonathan, 1995. "HERMIN Ireland," Economic Modelling, Elsevier, vol. 12(3), pages 249-274, July.
  3. Bradley, John & Fitzgerald, John, 1988. "Industrial output and factor input determination in an econometric model of a small open economy," European Economic Review, Elsevier, vol. 32(6), pages 1227-1241, July.
  4. Bradley, John & Whelan, Karl, 1997. "The Irish expansionary fiscal contraction: A tale from one small European economy," Economic Modelling, Elsevier, vol. 14(2), pages 175-201, April.
  5. Gabriele Tondl, 1999. "What Determined the Uneven Growth of Europe´s Southern Regions? An Empirical Study with Panel Data," Working Papers geewp04, Vienna University of Economics Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
  6. Sjed Ederveen & Joeri Gorter & Ruud de Mooij & Richard Nahuis, 2003. "Funds and Games: The Economics of European Cohesion Policy," Occasional Papers 03, European Network of Economic Policy Research Institutes.
  7. Sjef Ederveen & Henri L.F. de Groot & Richard Nahuis, 2002. "Fertile Soil for Structural Funds?," Tinbergen Institute Discussion Papers 02-096/3, Tinbergen Institute.
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Cited by:
  1. Tangian, Andranik S., 2005. "Composite indicator of German regional policy and its use for optimizing subsidies to regional labour markets," WSI Discussion Papers 138, Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung.
  2. Miroslav Šipikal, 2011. "Effectiveness of structural funds – microlevel perspective (case of Slovakia)," ERSA conference papers ersa11p473, European Regional Science Association.
  3. Edgar Morgenroth, 2006. "Economic Integration and Structural Change: The Case of Irish Regions," Papers WP176, Economic and Social Research Institute (ESRI).
  4. John Bradley & Timo Mitze & Edgar Morgenroth & Gerhard Untiedt, 2005. "An Integrated Micro-Macro (IMM) Approach to the Evaluation of Large-scale Public Investment Programmes: The Case of EU Structural Funds," Papers WP167, Economic and Social Research Institute (ESRI).
  5. Simeonova-Ganeva, Ralitsa & Ganev, Kaloyan, 2013. "Ефекти От Политиките, Финансирани От Европейските Фондове: Оценяване На Въздействието На Инвестициите В Обр�," MPRA Paper 48176, University Library of Munich, Germany.
  6. Moretti, Luigi, 2004. "I modelli macroeconomici per la valutazione dell'impatto dei Fondi strutturali nelle economie a Obiettivo 1
    [Macroeconomic Models Used for the Impact Evaluation of the Structural Funds in Objective
    ," MPRA Paper 18868, University Library of Munich, Germany.
  7. Roberto Esposti, 2008. "Regional growth convergence and EU policies: Empirical evidence and measuring problems," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 9(1), pages 14-22, 04.

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