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

  • Janos Varga and Jan in 't Veld

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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File URL: http://ec.europa.eu/economy_finance/publications/economic_paper/2010/pdf/ecp422_en.pdf
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Paper provided by Directorate General Economic and Financial 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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  1. Angel de la Fuente, 2009. "Testing, not modelling, the impact of Cohesion support: a theoretical framework and some preliminary results for the Spanish regions," Working Papers 419, Barcelona Graduate School of Economics.
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  11. 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 Financial Affairs (DG ECFIN), European Commission.
  12. S. Ederveen & H.L.F. de Groot & R. Nahuis, 2003. "Fertile Soil for Structural Funds? A panel data analysis of the conditional effectiveness of European cohesion policy," Working Papers 03-14, Utrecht School of Economics.
  13. 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 Financial Affairs (DG ECFIN), European Commission.
  14. 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.
  15. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank.
  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. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
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