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

Table 3: Synthetic Structural Funds cumulative “multiplier” on GDP

nt.

Two large macro-regions can be identified within the context of Objective 1 1994-
1999: the east German Lander and the Mezzogiorno of Italy. A HERMIN modelling
exercise has been undertaken for Eastern Germany and the result of this are reported
below, in the same format adopted above. Although Northern Ireland is only one of
the twelve standard economic regions of the United Kingdom, we include it as a
macro-region, mainly because it has reasonably comprehensive regional accounts, is
sufficiently large (with a population greater than that of Estonia or Slovenia), and has
a range of devolved policy-making powers.

The total size of the SPD in each region relative to its GDP (GECSFRAT) is shown in
Table 4. The averaged about 2 per cent of GDP in the case of East Germany, but was
considerably smaller in the case of Northern Ireland.

Table 4 Total Structural Funds expenditure as percentage of GDP (GECSFRAT)
East Germany and Northern Ireland

The East German economy started from a very low base after German unification, and
it is not surprising that the HERMIN model suggests that - other things being equal -
the East German economy is likely to grow rapidly.¹⁴ Table 5 suggests that the
impact of Structural Funds 94-99 on the level of aggregate GDP may be as high as 4

¹³ The values of GECSFRAT for Northern Ireland in 2000 and 2001 are 0.65 and 0.34 respectively.

¹⁴ The new growth theory suggests that the crucial driving force for convergence of a lagging economy
is the initial state of the economy (Barro and Sala-i-Martin, 1995).

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