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

Funds 94-99 era, many other external and policy variables would also be changing
(e.g., the implementation of Structural Funds 2000-06). ¹¹

Turning to Ireland, it is seen that the impact on the level of GDP in Ireland peaks at
just under 3 percent in the year 1999, and in the longer term the impact is just over 1
percent. During the operation of Structural Funds 94-99 the effect is to reduce the
rate of unemployment, and the pattern follows the Greek case: i.e., an initial one
percentage point cut in the unemployment rate, followed by smaller impacts as the
productivity impacts of the Structural Funds build up, and a reversal of these cuts
after the termination of the Structural Funds beyond 1999.

Turning to Portugal, the aggregate impacts on the level of GDP are quite large, and
peak at just over 4.5 percent in 1999. The impact on the rate of unemployment follow
the Greek and Irish patterns, with an initial strong negative impact, followed by
smaller negative impacts, and a reversal of the sign of the impacts after the Structural
Funds is complete.

In the case of Spain, it must be stressed that this country was divided into Objective 1
regions and non-Objective 1 regions. In the following tables what we show are the
impacts on the entire Spanish economy, and not just on the Objective 1 regions. In
the case of the aggregate GDP impacts, these appear small, but should be scaled in
terms of the smaller size of the Structural Funds relative to the national Spanish GDP.

In comparing the sizes of the impacts on the level of GDP, the size (or scale) of the
Structural Funds injection (both EU and domestic public sector co-finance) must be
borne in mind. A large Structural Funds impact in terms of an increase in the level of
GDP may simply arise because the Structural Funds expenditures are large as a
fraction of GDP. We need to normalise for this scale effect, and as a guide we can
construct a type of “cumulative” Structural Funds multiplier defined as follows:

¹¹ Once again, it should be stressed that the Structural Funds shock being analysed consists of
Structural Funds 94-99 in isolation. The impacts that the model simulates post-1999 would never be
observed in practice because Structural Funds 2000-06 will take over, or in the case of Ireland, the
domestic funding of the Irish NDP 2000-06 (of which Structural Funds 2000-06 is a small part) is very
much larger than Structural Funds 94-99.

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