Macro-regional evaluation of the Structural Funds using the HERMIN modelling framework



vii. The “without- Structural Funds ” simulation results are subtracted from the
“with- Structural Funds ” simulation results, and this is used as a measure of
the contribution of the Structural Funds to a range of macroeconomic targets.

While the model-based macro-economic analysis holds out the promise of
quantification of CSF impacts, it is important not to exaggerate the potential of this
methodology. Anyone expecting a simple, single, easily derived “correct” answer to
a question such as “what was the impact of CSF 94-99 on GDP?”, is likely to be
disappointed. Indeed, such a question is conceptually vague and ill-posed for a
number of reasons.

?? The exclusive focus on the causal impacts of the Structural Funds policies (in
isolation) on economic activity tends to neglect the fact that economic activity in
any country or region is affected by a wide range of other policy shocks (e.g.,
fiscal, monetary, industrial, social, labour market etc) and other external shocks
(developments in world growth, oil shocks, wars, etc). The beneficial impacts of
the Structural Funds 94-99 are likely to operate in conjunction with other policy
shocks and it may be difficult, or impossible, to disentangle the isolated impacts
of the Structural Funds in a completely satisfactory way. The HERMIN models
attempt to disentangle the separate Structural Funds impacts, using the
methodology described in the MEANS handbooks.

?? The manner of incorporating the Structural Funds mechanism into the
HERMIN model draws on very recent economic research that itself has only just
begun to address the questions of the relationship between increased public
investment and the consequences for improved levels of economic activity and
development

?? The HERMIN models themselves are not above criticism, and other models
could be used and would be likely to give different answers. For example the
Commission’s own QUEST model - which incorporates strong “crowding-out”
mechanisms due to the inclusion of model-consistent expectations mechanisms -
tends to give lower Structural Funds impacts. A recent survey of cohesion policy
analysis by researchers at the Dutch CPB suggests that simpler single-equation

15



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