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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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  • John Bradley & Edgar Morgenroth & Gerhard Untiedt, 2003. "Macro-regional evaluation of the Structural Funds using the HERMIN modelling framework," ERSA conference papers ersa03p313, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa03p313
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    Cited by:

    1. Andries Brandsma & d'Artis Kancs & Philippe Monfort & Alexandra Rillaers, 2015. "RHOMOLO: A dynamic spatial general equilibrium model for assessing the impact of cohesion policy," Papers in Regional Science, Wiley Blackwell, vol. 94, pages 197-221, November.
    2. Roberto Esposti, 2008. "Regional growth convergence and EU policies: Empirical evidence and measuring problems," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 9(1), pages 14-22, April.
    3. Arkadiusz M. Kowalski, 2005. "Polityka regionalna Unii Europejskiej w Irlandii," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 4, pages 73-98.
    4. Roberto Esposti & Stefania Bussoletti, 2008. "Impact of Objective 1 Funds on Regional Growth Convergence in the European Union: A Panel-data Approach," Regional Studies, Taylor & Francis Journals, vol. 42(2), pages 159-173.
    5. Daniel Stavárek & Lucie Tomanova, 2014. "Is the Region of Visegrad Countries on the Track to the Euro Area? Recent Evidence from the Real Convergence Perspective," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(3), pages 130-139.
    6. Tangian, Andranik S., 2005. "Composite indicator of German regional policy and its use for optimizing subsidies to regional labour markets," WSI Working Papers 138, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
    7. Miroslav Šipikal, 2011. "Effectiveness of structural funds – microlevel perspective (case of Slovakia)," ERSA conference papers ersa11p473, European Regional Science Association.
    8. Krystyna Gawlikowska-Hueckel & Jacek Szlachta, 2016. "The Vulnerability of Polish Regions to the Challenges of the Modern Economy," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 4, pages 23-46.
    9. 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.
    10. 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).
    11. Marek RADVANSKÝ & Tomas DOMONKOS, 2010. "Regional Disparities under Different Types of Cohesion Policy," EcoMod2010 259600138, EcoMod.
    12. Cardenete, Manuel Alejandro & Delgado, M. Carmen, 2015. "A simulation of impact of withdrawal European funds on Andalusian economy using a dynamic CGE model: 2014–20," Economic Modelling, Elsevier, vol. 45(C), pages 83-92.
    13. Edgar Morgenroth, 2006. "Economic Integration and Structural Change: The Case of Irish Regions," Papers WP176, Economic and Social Research Institute (ESRI).
    14. Roberto Esposti, 2008. "Regional growth convergence and EU policies: Empirical evidence and measuring problems," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 9(01), pages 14-22, April.
    15. Brandsma, Andries & Di Comite, Francesco & Diukanova, Olga & Kancs, d’Artis & López-Rodríguez, Jesús & Persyn, Damiaan & Potters, Lesley, 2014. "Assessing policy options for the EU Cohesion Policy 2014-2020," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 29, pages 17-46.
    16. Simeonova-Ganeva, Ralitsa & Ganev, Kaloyan, 2013. "Ефекти От Политиките, Финансирани От Европейските Фондове: Оценяване На Въздействието На Инвестициите В Образование И Наука В България [Effects of EU Funded Policies: Net Impact Assessment of Inves," MPRA Paper 48176, University Library of Munich, Germany.

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