Author(s): Janos Varga and Jan in 't Veld, European Commission
This 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.
|ISBN 978-92-79-14908-5 (online)|
|ISSN 1725-3187 (online)|
|doi: 10.2765/43684 (online)|
Economic Papers are written by the staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author’s alone and do not necessarily correspond to those of the European Commission.