1 Demonstration of the capacity of a bi-regional CGE model to assess impacts of the Rural Development Policy measures IPTS/SUSTAG University of Patras University of Patras

2 26/11/2008Demonstration workshop on a bi-regional CGE approach - IntroductionObjective to present the elements and characteristics of the Bi-Regional (rural/urban) Computable General Equilibrium (CGE) methodologyto present the elements and characteristics of the Bi-Regional (rural/urban) Computable General Equilibrium (CGE) methodology to demonstrate its capacity to assess the spatial impacts of Axis 3 Rural Development Policy (RDP) measuresto demonstrate its capacity to assess the spatial impacts of Axis 3 Rural Development Policy (RDP) measures to discuss possibilitiesto discuss possibilities –of further development of such an approach –its integration in the policy analysis (incl. which improvements are needed)

3 26/11/2008Demonstration workshop on a bi-regional CGE approach - IntroductionAGENDATimeSubject/presentationPresenter 9:30 Opening and introduction of participants Tomas Ratinger (IPTS) 9:40 Introduction of the background of the workshop, Tomas Ratinger 9:55 Introduction to the bi-regional CGE model Dimitrios Psaltopoulos (U Patras) 10:25 Introduction to the Czech and Greek case study regions and their reflection in the model structure Eudokia Balamou (U Patras) 11:00 Coffee break 11:15 Implementation of policy measures and policy scenarios Dimitrios Psaltopoulos 11:45 Presentation of results i) policy measure perspective ii) regional development perspective Eudokia Balamou/ Dimitrios Psaltopoulos 12;45Lunch 14:00-16:30 Discussion on the future development Chaired by Tomas Ratinger Summary of pros and cons of the demonstrated approach Necessary improvements to make the approach useful for policy Assumptions, robustness, sensitivity analysis Spatial aspects and data requirements Free discussion on future development of modelling instruments for the impact assessment of rural development policy measures (Axis 3)

4 Background of the workshop Tomas Ratinger IPTS/SUSTAG

5 26/11/2008Demonstration workshop on a bi-regional CGE approach - Introduction Needs for RD modelling result from the needs for assessing the (ex- ante, ex post) impact of rural development policiesresult from the needs for assessing the (ex- ante, ex post) impact of rural development policies –on rural areas and the other areas (economies): e.g. economic growth, employment, migration, … –on actors (recipients and the other): sectoral income, household income,… – to assess the effectiveness and efficiency of policy measures – to assess the needs for and benefits of modifying policy measures

6 26/11/2008Demonstration workshop on a bi-regional CGE approach - Introduction General requirements on models –a model is a theoretical construct that represents economic processes –models are simplified frameworks designed to illustrate complex processes to be policy relevantto be policy relevant –to have variables, parameters able to reflect policy measures calculations to be repeatable with changed parameters (simulation of scenarios)calculations to be repeatable with changed parameters (simulation of scenarios) to be reliable and robustto be reliable and robust –and the way how to demonstrate it to be operationalto be operational –under the terms of use, frequency, type of analyses, …

7 26/11/2008Demonstration workshop on a bi-regional CGE approach - Introduction Requirements on models for RDP to incorporate the spatial dimensionto incorporate the spatial dimension –since rural areas are diverse territories –rural areas are linked to other areas to be multi-sectoral, multi-institutionalto be multi-sectoral, multi-institutional –since RD policy addresses more sectors than only agriculture –instruments (e.g. investment support) may stimulate/ have impacts on the other sectors (e.g. construction) –some measures have non-economic objectives (e.g. improving quality of life) (DG AGRI.L2 specific)(DG AGRI.L2 specific) –to provide results which can be used for EU policy making (coverage of territories and issues) –to provide mid-term forecast –to aim at Axis 3 measures

8 26/11/2008Demonstration workshop on a bi-regional CGE approach - Introduction Axis 3 impact assessment Policy Issues (measure objectives, instruments, recipients)Policy Issues (measure objectives, instruments, recipients) –Diversification of rural economy Investment support for micro enterprises (agric. (311), non-agric (312))Investment support for micro enterprises (agric. (311), non-agric (312)) Encouragement of rural tourism (313)Encouragement of rural tourism (313) –Improving the quality of life in rural areas (basic services, village renewal (322), cultural heritage) Areas of impacts and impact assessment indicatorsAreas of impacts and impact assessment indicators –Stabilisation of settlement, migration (in, out)?, –Balanced economic structures, employment (structure, growth), GDP (structure, growth)?, –Income of households ( and its distribution)? –Interregional differences in policy impacts: distribution of support, income, inequitable regional development (lagging RA) –Rural urban relationship

9 26/11/2008Demonstration workshop on a bi-regional CGE approach - Introduction Approaches to the spatial dimension Full coverage by regional modelsFull coverage by regional models Set of typical regional models selected using a typologySet of typical regional models selected using a typology Distinction of rural economiesDistinction of rural economies –Classification of model regions (NUTS3) e.g. using the OECD typology as PR, IR, PU –Separation of rural and urban areas in model regions

10 26/11/2008Demonstration workshop on a bi-regional CGE approach - Introduction Spatial approaches From spatial analysis to socio economic modelling From socio economic modelling to spatial analysis RURMOD-E, CAPRI-RD TERA SIAP Policy impact assessment A flexible typology of EU Rural A. Bi- regional CGE model for selected regions Full NUTS2 coverage CGE model I/O model for selected regions

11 26/11/2008Demonstration workshop on a bi-regional CGE approach - Introduction Selection of the model approach Review of modelsReview of models –Project Review of typologies … –Project TERA-SAIP –SUSTAG own survey of models suitable for Axis 3 measures analysis Criteria for selectionCriteria for selection –Suitable for Axis 3 measures and assessment of related indicators of their performance – sufficient level of details (both spatial, as well as structural)sufficient level of details (both spatial, as well as structural) General equilibrium basedGeneral equilibrium based –Already operational, built on relatively recent data, well documented –Potential to be adjusted to policy analysis needs

12 26/11/2008Demonstration workshop on a bi-regional CGE approach - Introduction Bi-Regional CGE (TERA FP6 project) Objective: to model rural-urban relationship. It considers a range of policies to be assessed by the instrument:Objective: to model rural-urban relationship. It considers a range of policies to be assessed by the instrument: –dealing with distance (e.g. transport policies, other communications) –CAP Pillar1 –externalities Special focusSpecial focus –rural-urban relationship with a particular focus on distance (remoteness) Model featuresModel features –Comparative static CGE –transport and transport sector is modelled explicitly; –transport cost links R and U housing markets –household are broken down in three categories: having job locally, commuting within the region and commuting out of the region; –labour is differentiated according to location and skill –the two regions (remote rural and urban) are treated as one single economy SIA characteristicsSIA characteristics –smaller regions (NUTS4/5), RA-UA pairs, 6 case studies (CZ, FI, GR, IT, LV, UK)