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

Cumulative Structural Funds multiplier:

Cumulative percentage increase in GDP / Cumulative Structural Funds share in
GDP

Table 3 shows the cumulative multiplier (defined as above) for GDP for the years
1994-1999, 1994-2002 and 1994-2010 for Structural Funds 94-99. For Greece the
cumulative Structural Funds multiplier is seen to rise from the value 0.67 for 1994-
1999, to 0.76 for 1994-2002, and rises further to 1.07 for 1994-2020. Thus, after all
planned CSF 94-99 expenditures effectively cease after the year 1999, there are
continuing supply-side benefits from the Structural Funds in later periods due to the
externality mechanisms described in the previous section. In the absence of such
mechanisms, the cumulative Structural Funds multiplier would remain at a value of
about 0.7. What is striking in this table is that the cumulative Structural Funds 94-99
multipliers are quite large for Ireland compared to Greece.¹² Clearly the Irish
economy responds to the Structural Funds shock in a more growth-oriented way, and
the greater degree of openness facilitates greater transitional growth. These structural
features of the Irish economy have been captured by the HERMIN model.

In Portugal, the cumulative Structural Funds multipliers are seen to be at the higher
end of the scale. However, although the increase in the level of GDP in Portugal is
higher than in Ireland, due to the fact that the Structural Funds forms a higher
percentage of GDP, the Portuguese cumulative multipliers are slightly lower than
those for Ireland. This also reflects the openness of the Portuguese economy, which is
in the range between that of Greece and Ireland. In Spain, the cumulative multipliers
are bigger than the Greek case, but smaller than the Portuguese case. Surprisingly,
the Spanish economy is more open than the Greek economy, even though one would
have expected openness to decline as size increases. One is tempted to conclude that
while the Structural Funds investment programmes were relatively more effective for
Ireland, Portugal and Spain than for Greece, their reduced effectiveness in the case of
Greece has deep roots in the sectoral structure and properties of the Greek economy
that have proved difficult to change since 1989.

¹² It should be recalled that the same externality elasticises are used in all the Structural Funds.

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