Economic impact evaluation challenges posed by the new European Union Cohesion policy: The case of the GMR-approach Attila Varga University of Pécs, Hungary

Outline Introduction The New Cohesion Policy and economic impact evaluation challenges The GMR approach Policy simulations Conclusions 1

Introduction Project level vs. economic evaluation – the need for economic models Cohesion Policy: regional development vs. monetary transfers Smart growth, inclusive growth, sustainable growth Place-based approach: Smart specialization Challenges for economic impact evaluation 2

Challenges in economic impact evaluation Place-based approach to economic development – “smart specialization” In target: place-specific industrial comparative advantages integrated policy instruments (human capital, R&D, entrepreneurship) multi-level governance Participation (industry, universities, local organizations) 3

Regional features determining the growth effects of development policies: – Local specificities (industrial structure, research specialization, factor endowment) – Cumulative agglomeration effects – Additional impacts (Keynesian demand effects, intersectoral linkages) – Interrregional impacts (spillovers, trade, migration) 4 Challenges in economic impact evaluation

The macroeconomic dimension: selection of projects/regions – on what basis? – Same budget – diff results: depending on the instrumental distribution (ref. to the first simulation) – Same budget – diff results: depending on the regional distribution (ref. to the second simulation)  Need for macro level representation (costs/benefits, macroeconomic framework conditions) 5 Challenges in economic impact evaluation

Representation of both: – Macroeconomic dimension: costs and benefits – Regional dimension: local specificities affecting policy needs and policy effectiveness 6 Challenges in economic impact evaluation

Search for new impact modeling approaches: – MASST (Capello-Fratesi 2013) – GMR-type models GMR-Hungary, GMR-Europe (Varga et al. 2010, 2013) RHOMOLO (Brandsma et al. 2012) 7 Challenges in economic impact evaluation

The GMR (Geographic Macro and Regional) impact modeling approach 8

The GMR approach: Model versions and applications Antecedents and model versions: –Links to theory: Acs-Varga 2002 –Empirical modeling framework (Varga 2006) –The EcoRet model (Schalk, Varga 2004, Varga, Schalk 2004) –GMR-Hungary: (Varga, Schalk, Koike, Járosi,Tavasszy 2008) –GMR-EU (Varga, Járosi, Sebestyén 2011; Varga,Törma 2011) –GMR-HUNGARY II (Varga, Járosi, Sebestyén, 2013) 9

The GMR approach: Model versions and applications Applications : –Cohesion Policy impact studies for the Hungarian government (2003- ) –Cohesion Policy impact studies for the European Commission (DG Regio ) –FP6 impact study (2010) 10

The GMR- Europe model (163 EU NUTS 2 regions and the EU level) includes: –a regional Knowledge Production Function (KPF) sub-model (163 NUTS 2 regions) –a regional Spatial Computable General Equilibrium (SCGE) sub-model (163 NUTS 2 regions) –a macro (EU level) Dynamic Stochastic General Equilibrium (DSGE) sub-model (Quest III) 11

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