The Impact of EU Accession in Romania: An Analysis of Regional Development Policy Effects by a Multiregional I-O Model

funds and structural funds), which represent about 84% of total expenditure (excluding the chapters of
internal policies and administration, whose distribution among the two countries is not well specified).
In Tab. 1, the distribution of funds appropriated to Romania is shown.

Table 1. Financial Allocation per kind of policy instrument, Romania, 2007-09 (million euro, 2000

prices*).______________________________________________________________________________________________________

* Within the EC’s proposal, funds are expressed in 2004 prices. Since the multiregional I-O model developed in this research refers to the year
2000, funds were converted into 2000 prices using the Harmonised Index of Consumer Prices (HICPs)

Source: Author’s elaboration on data from European Commission (2004c)

2 Methodology used and area under study

In order to estimate impact from EU policy application for the period 2007-09, a multiregional I-
O model is adopted. In spite of some restrictive assumptions (Gerking et al., 2001), I-O model is still
considered a valid tool to quantify total effects in terms of output and, by a simple extension, of
income and employment, deriving from final demand variation (Doyle et al., 1997). Moreover, the
multiregional version offers further advantages: it guarantees major internal consistency than one-
region models, it allows taking account of the diverse pattern of consumption in the different regions,
capturing effects due to trade relationships among regions and mapping impact distribution on the
territory.

The regions under study are the eight Romanian NUTS-2 level development regions²: the North-
East region (NER), the South-East region (SER), the South region (SR), the South-West region
(SWR), the West region (WR), the North-West region (NWR), the Center region (CR), and the
Bucharest region (BR).

A peculiar characteristic of Romania’s economic growth over the last ten years has been the
increasing importance of BR. With about 10% of national population, BR in 1998 produced 17% of
total GDP (Tab. 2). Development of BR is due to the presence of the capital Bucharest. In 2001,
Bucharest attracted more than 50% of total foreign investment. In addition, the capital is one of the
few areas which are experiencing high positive internal migration flows for work and school reasons.
Nevertheless, the capital has not produced so far significant spill-over in favour of neighbouring areas.
In fact, several counties which are in its immediate surroundings are still undeveloped (Romanian
Ministry of Integration, 2003).

A further feature of the Romania’s economic growth is the unbalanced development in favour of
the western and central regions which have benefited from several factors: proximity to western
markets, historically lower dependence on the primary sector and relatively higher flows of foreign
direct investments. The eastern area is the less developed. Here, NER and SR are those which present
lower levels of development. The former has suffered from its proximity to the border with Moldova
and Ukraine and from its traditional heavy dependence on agriculture whereas the latter, besides its
strong dependence on the primary sector, has been hindered by the Danube which has acted as a
barrier to cross-border trade.

This diverse path of economic growth has generated a self-reinforcement process also due to
fiscal policy mechanisms. In the regions lagging behind, investments have increasingly decreased also

estimating impact in Romania and in the North-West region through application of a national I-O model and a regional I-O
model, respectively.

² Law No.151 regarding regional development, adopted in 1998, established the institutional framework, objectives,
competences, and specific instruments for regional development policy in Romania. With the aim of achieving the main
objectives of regional development policy, Law No.151/1998 authorized the creation of 8 development regions -
corresponding with NUTS II level, through the voluntary association of counties. These regions are not administrative units,
and do not have legal personality.

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