Regional general equilibrium modelling with forward-looking agents: an application to the 2014-2020 European structural regional investments
JRC Working Papers Series on Territorial Modelling and Analysis no. 12/2022
We investigate the macroeconomic effects of the investments of the European Regional Development Fund and the Cohesion Fund financed by the 2014-2020 cohesion policy. We use a general equilibrium model calibrated on the NUTS 1 regions of the EU with forward-looking agents in order to take into account expectations and potential long-lasting effects of the policy. We show that the almost €260 billion of investments lead the European GDP to be 0.3% higher in 2022 than it would be in the absence of the policy. Interestingly, this effect is lower than what a model with myopic agents would suggest. The regional distribution of the differences in the GDP impacts between the two settings indicates that the largest deviations are recorded for the net recipient regions, with interesting implications regarding the policy credibility, the nature of the interventions and their duration. These findings suggest that it would be worth investing in developing spatial models capable of dealing with alternative assumptions regarding the economic agents’ expectation formation.
CRUCITTI Francesca;
LECCA Patrizio;
MONFORT Philippe;
SALOTTI Simone;
2022-10-07
European Commission
JRC130196
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