IDEAS home Printed from https://ideas.repec.org/p/ipt/termod/202204.html
   My bibliography  Save this paper

Improving government quality in the regions of the EU and its system-wide benefits for Cohesion policy

Author

Listed:

Abstract

We quantify the general equilibrium effects on economic growth of improving the quality of institutions at the regional level in the context of the implementation of the European Cohesion Policy for the European Union and the UK. The direct impact of changes in the quality of government is integrated in a general equilibrium model to analyse the system-wide economic effects resulting from additional endogenous mechanisms and feedback effects. The results reveal a significant direct effect as well as considerable system-wide benefits from improved government quality on economic growth. A small 5% increase in government quality across European Union regions increases the impact of Cohesion investment by up to 7% in the short run and 3% in the long run. The exact magnitude of the gains depends on various local factors, including the initial endowments of public capital, the level of government quality, and the degree of persistence over time.

Suggested Citation

  • Javier Barbero & Martin Christensen & Andrea Conte & Patrizio Lecca & Andrés Rodríguez-Pose & Simone Salotti, 2022. "Improving government quality in the regions of the EU and its system-wide benefits for Cohesion policy," JRC Working Papers on Territorial Modelling and Analysis 2022-04, Joint Research Centre.
    • Handle: RePEc:ipt:termod:202204
    as

    Download full text from publisher

    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC128443
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrés Rodríguez-Pose & Tobias Ketterer, 2020. "Institutional change and the development of lagging regions in Europe," Regional Studies, Taylor & Francis Journals, vol. 54(7), pages 974-986, July.
    2. Andr�s Rodr�guez-Pose & Enrique Garcilazo, 2015. "Quality of Government and the Returns of Investment: Examining the Impact of Cohesion Expenditure in European Regions," Regional Studies, Taylor & Francis Journals, vol. 49(8), pages 1274-1290, August.
    3. Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-296, June.
    4. Peter Nijkamp & Jacques Poot, 2005. "The Last Word on the Wage Curve?," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 421-450, July.
    5. Andrés Rodríguez‐Pose & Min Zhang, 2019. "Government institutions and the dynamics of urban growth in China," Journal of Regional Science, Wiley Blackwell, vol. 59(4), pages 633-668, September.
    6. Fisher, Walter H & Turnovsky, Stephen J, 1998. "Public Investment, Congestion, and Private Capital Accumulation," Economic Journal, Royal Economic Society, vol. 108(447), pages 399-413, March.
    7. Becker, Sascha O. & Egger, Peter H. & von Ehrlich, Maximilian, 2012. "Too much of a good thing? On the growth effects of the EU's regional policy," European Economic Review, Elsevier, vol. 56(4), pages 648-668.
    8. Christophe Kamps, 2006. "New Estimates of Government Net Capital Stocks for 22 OECD Countries, 1960-2001," IMF Staff Papers, Palgrave Macmillan, vol. 53(1), pages 1-6.
    9. Rodríguez-Pose, Andrés & Di Cataldo, Marco, 2016. "What drives employment growth and social inclusion in EU regions?," CEPR Discussion Papers 11551, C.E.P.R. Discussion Papers.
    10. Aadne Cappelen & Fulvio Castellacci & Jan Fagerberg & Bart Verspagen, 2003. "The Impact of EU Regional Support on Growth and Convergence in the European Union," Journal of Common Market Studies, Wiley Blackwell, vol. 41(4), pages 621-644, September.
    11. Glomm, Gerhard & Ravikumar, B., 1994. "Public investment in infrastructure in a simple growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1173-1187, November.
    12. Nicola Cortinovis & Jing Xiao & Ron Boschma & Frank G van Oort, 2017. "Quality of government and social capital as drivers of regional diversification in Europe," Journal of Economic Geography, Oxford University Press, vol. 17(6), pages 1179-1208.
    13. Guido Pellegrini & Flavia Terribile & Ornella Tarola & Teo Muccigrosso & Federica Busillo, 2013. "Measuring the effects of European Regional Policy on economic growth: A regression discontinuity approach," Papers in Regional Science, Wiley Blackwell, vol. 92(1), pages 217-233, March.
    14. Aparicio, Sebastian & Urbano, David & Audretsch, David, 2016. "Institutional factors, opportunity entrepreneurship and economic growth: Panel data evidence," Technological Forecasting and Social Change, Elsevier, vol. 102(C), pages 45-61.
    15. Nicholas Charron & Victor Lapuente & Paola Annoni, 2019. "Measuring quality of government in EU regions across space and time," Papers in Regional Science, Wiley Blackwell, vol. 98(5), pages 1925-1953, October.
    16. Augusto Cerqua & Guido Pellegrini, 2018. "Are we spending too much to grow? The case of Structural Funds," Journal of Regional Science, Wiley Blackwell, vol. 58(3), pages 535-563, June.
    17. Riccardo Crescenzi & Mara Giua, 2016. "The EU Cohesion Policy in context: Does a bottom-up approach work in all regions?," Environment and Planning A, , vol. 48(11), pages 2340-2357, November.
    18. Andrés Rodríguez-Pose & Marco Di Cataldo, 2015. "Quality of government and innovative performance in the regions of Europe," Journal of Economic Geography, Oxford University Press, vol. 15(4), pages 673-706.
    19. Nicholas Charron & Lewis Dijkstra & Victor Lapuente, 2015. "Erratum to: Mapping the Regional Divide in Europe: A Measure for Assessing Quality of Government in 206 European Regions," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 124(3), pages 1059-1059, December.
    20. Futagami, Koichi & Morita, Yuichi & Shibata, Akihisa, 1993. " Dynamic Analysis of an Endogenous Growth Model with Public Capital," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 607-625, December.
    21. Gupta, Sanjeev & Kangur, Alvar & Papageorgiou, Chris & Wane, Abdoul, 2014. "Efficiency-Adjusted Public Capital and Growth," World Development, Elsevier, vol. 57(C), pages 164-178.
    22. Riccardo Crescenzi & Marco Di Cataldo & Andrés Rodríguez-Pose, 2016. "Government Quality And The Economic Returns Of Transport Infrastructure Investment In European Regions," Journal of Regional Science, Wiley Blackwell, vol. 56(4), pages 555-582, September.
    23. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    24. Christophe Kamps, 2006. "New Estimates of Government Net Capital Stocks for 22 OECD Countries, 1960-2001," IMF Staff Papers, Palgrave Macmillan, vol. 53(1), pages 1-6.
    25. Tobias D. Ketterer & Andrés Rodríguez‐Pose, 2018. "Institutions vs. ‘first‐nature’ geography: What drives economic growth in Europe's regions?," Papers in Regional Science, Wiley Blackwell, vol. 97(S1), pages 25-62, March.
    26. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
    27. Marco Di Cataldo & Andrés Rodríguez-Pose, 2017. "What drives employment growth and social inclusion in the regions of the European Union?," Regional Studies, Taylor & Francis Journals, vol. 51(12), pages 1840-1859, December.
    28. Turnovsky, Stephen J. & Fisher, Walter H., 1995. "The composition of government expenditure and its consequences for macroeconomic performance," Journal of Economic Dynamics and Control, Elsevier, vol. 19(4), pages 747-786, May.
    29. Andres RodrIguez-Pose & Ugo Fratesi†, 2004. "Between Development and Social Policies: The Impact of European Structural Funds in Objective 1 Regions," Regional Studies, Taylor & Francis Journals, vol. 38(1), pages 97-113.
    30. Robert Huggins & Piers Thompson, 2016. "Socio-Spatial Culture and Entrepreneurship: Some Theoretical and Empirical Observations," Economic Geography, Taylor & Francis Journals, vol. 92(3), pages 269-300, July.
    31. Mr. Serkan Arslanalp & Fabian Bornhorst & Mr. Sanjeev Gupta & Ms. Elsa Sze, 2010. "Public Capital and Growth," IMF Working Papers 2010/175, International Monetary Fund.
    32. Baxter, Marianne & King, Robert G, 1993. "Fiscal Policy in General Equilibrium," American Economic Review, American Economic Association, vol. 83(3), pages 315-334, June.
    33. Alonso-Carrera, Jaime & Freire-Serén, María Jesús & Manzano, Baltasar, 2009. "Macroeconomic effects of the regional allocation of public capital formation," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 563-574, September.
    34. Nicholas Charron & Lewis Dijkstra & Victor Lapuente, 2015. "Mapping the Regional Divide in Europe: A Measure for Assessing Quality of Government in 206 European Regions," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 122(2), pages 315-346, June.
    35. Mark Thissen & Olga Ivanova & Giovanni Mandras & Trond Husby, 2019. "European NUTS 2 regions: construction of interregional trade-linked Supply and Use tables with consistent transport flows," JRC Working Papers on Territorial Modelling and Analysis 2019-01, Joint Research Centre (Seville site).
    36. Aadne Cappelen & Fulvio Castellacci & Jan Fagerberg & Bart Verspagen, 2003. "The Impact of EU Regional Support on Growth and Convergence in the European Union," Journal of Common Market Studies, Wiley Blackwell, vol. 41(4), pages 621-644, September.
    37. Roberto Ezcurra & Vicente Rios, 2019. "Quality of government and regional resilience in the European Union. Evidence from the Great Recession," Papers in Regional Science, Wiley Blackwell, vol. 98(3), pages 1267-1290, June.
    38. Nicholas Charron & Lewis Dijkstra & Victor Lapuente, 2014. "Regional Governance Matters: Quality of Government within European Union Member States," Regional Studies, Taylor & Francis Journals, vol. 48(1), pages 68-90, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Daniel Aparicio-Pérez & Maria Teresa Balaguer-Coll & Emili Tortosa-Ausina, 2023. "On the relative contributions of national and regional institutions to economic development," Working Papers 2023/01, Economics Department, Universitat Jaume I, Castellón (Spain).
    2. Mussida, Chiara & Parisi, Maria Laura & Pontarollo, Nicola, 2023. "Severity of material deprivation in Spanish regions and the role of the European Structural Funds," Socio-Economic Planning Sciences, Elsevier, vol. 88(C).
    3. Inmaculada C. Alvarez & Javier Barbero & Luis Orea & Andrés Rodríguez-Pose, 2023. "How institutions shape the economic returns of public investment in European regions," JRC Working Papers on Territorial Modelling and Analysis 2023-08, Joint Research Centre.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andrés Rodríguez‐Pose, 2020. "Institutions and the fortunes of territories," Regional Science Policy & Practice, Wiley Blackwell, vol. 12(3), pages 371-386, June.
    2. Patrizio Lecca & Javier Barbero Jimenez & Martin Aaroe Christensen & Andrea Conte & Francesco Di Comite & Jorge Diaz-Lanchas & Olga Diukanova & Giovanni Mandras & Damiaan Persyn & Stylianos Sakkas, 2018. "RHOMOLO V3:A Spatial Modelling Framework," JRC Research Reports JRC111861, Joint Research Centre.
    3. Paolo Di Caro & Ugo Fratesi, 2022. "One policy, different effects: Estimating the region‐specific impacts of EU cohesion policy," Journal of Regional Science, Wiley Blackwell, vol. 62(1), pages 307-330, January.
    4. Patrizio Lecca & Peter McGregor & Kim Swales, 2010. "Balanced Budget Government Spending in a Small Open Regional Economy," Working Papers 1020, University of Strathclyde Business School, Department of Economics.
    5. Julia Bachtrögler & Christoph Hammer & Wolf Heinrich Reuter & Florian Schwendinger, 2019. "Guide to the galaxy of EU regional funds recipients: evidence from new data," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(1), pages 103-150, February.
    6. Sara Amoroso & Benedikt Herrmann & Alexander S. Kritikos, 2023. "The Role of Regulation and Regional Government Quality for High Growth Firms: The Good, the Bad, and the Ugly," Discussion Papers of DIW Berlin 2053, DIW Berlin, German Institute for Economic Research.
    7. Javier Barbero & Giovanni Mandras & Ernesto Rodríguez-Crespo & Andrés Rodríguez-Pose, 2021. "Quality of government and regional trade: evidence from European Union regions," Regional Studies, Taylor & Francis Journals, vol. 55(7), pages 1240-1251, July.
    8. Bom, Pedro R.D. & Ligthart, Jenny E., 2014. "Public infrastructure investment, output dynamics, and balanced budget fiscal rules," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 334-354.
    9. Maria Teresa Balaguer‐Coll & Isabel Narbón‐Perpiñá & Jesús Peiró‐Palomino & Emili Tortosa‐Ausina, 2022. "Quality of government and economic growth at the municipal level: Evidence from Spain," Journal of Regional Science, Wiley Blackwell, vol. 62(1), pages 96-124, January.
    10. Mindaugas Butkus & Alma Maciulyte-Sniukiene & Kristina Matuzeviciute, 2020. "Heterogeneous growth outcomes of the EU’s regional financial support mediated by institutions with some empirical evidences at NUTS 3 level," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 40(1), pages 33-66, April.
    11. Jonathan Muringani, 2022. "Trust as a catalyst for regional growth in a decentralized Europe: The interplay between informal and formal institutions in driving economic growth," Journal of Regional Science, Wiley Blackwell, vol. 62(5), pages 1229-1249, November.
    12. Elena Calegari & Enrico Fabrizi & Gianni Guastella & Francesco Timpano, 2021. "EU regional convergence in the agricultural sector: Are there synergies between agricultural and regional policies?," Papers in Regional Science, Wiley Blackwell, vol. 100(1), pages 23-50, February.
    13. Eleonora Cutrini, 2023. "Postcrisis recovery in the regions of Europe: Does institutional quality matter?," Journal of Regional Science, Wiley Blackwell, vol. 63(1), pages 5-29, January.
    14. Jan Fidrmuc & Martin Hulényi & Olga Zajkowska, 2019. "The Elusive Quest for the Holy Grail of an Impact of EU Funds on Regional Growth," CESifo Working Paper Series 7989, CESifo.
    15. Andrés Rodríguez-Pose & Vinko Muštra, 2022. "The economic returns of decentralisation: Government quality and the role of space," Environment and Planning A, , vol. 54(8), pages 1604-1622, November.
    16. Cerqua, Augusto & Pellegrini, Guido, 2018. "Local policy effects at a time of economic crisis," MPRA Paper 85621, University Library of Munich, Germany.
    17. Andrés Rodríguez-Pose & Tobias Ketterer, 2020. "Institutional change and the development of lagging regions in Europe," Regional Studies, Taylor & Francis Journals, vol. 54(7), pages 974-986, July.
    18. Roberta Arbolino & Raffaele Boffardi, 2017. "The Impact of Institutional Quality and Efficient Cohesion Investments on Economic Growth Evidence from Italian Regions," Sustainability, MDPI, vol. 9(8), pages 1-17, August.
    19. Marco Di Cataldo & Vassilis Monastiriotis, 2018. "An assessment of EU Cohesion Policy in the UK regions: direct effects and the dividend of targeting," LEQS – LSE 'Europe in Question' Discussion Paper Series 135, European Institute, LSE.
    20. Mindaugas Butkus & Alma Maciulyte-Sniukiene & Renata Macaitiene & Kristina Matuzeviciute, 2021. "A New Approach to Examine Non-Linear and Mediated Growth and Convergence Outcomes of Cohesion Policy," Economies, MDPI, vol. 9(3), pages 1-28, July.

    More about this item

    Keywords

    government quality; cohesion; economic growth; public investment; regions; EU;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ipt:termod:202204. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Publication Officer (email available below). General contact details of provider: https://edirc.repec.org/data/ipjrces.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.