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

the Structural Funds mechanisms are merely one factor in the decomposition of
aggregate development performance.

The cumulative multipliers for Northern Ireland are among the lowest cumulative
multipliers of the six cases that have been evaluated using HERMIN models. More
detailed work which is not shown here for space reasons suggest that much of the
SPD funding was spent on construction and training activities, and that the
manufacturing sector - where the enduring long-lasting impacts of the SPD tend to
arise - was less affected. Thus, the long-run benefits were truncated and the
cumulative multipliers were correspondingly smaller.

Table 6: Structural Funds cumulative “multiplier” on GDP

5. Summary and Conclusions

This paper has outlined the HERMIN modelling framework which has been widely
used for Structural Funds analysis. The use of such a fully specified multi-equation
econometric model has the advantage of capturing even the indirect impacts of the
Structural Funds. The outline showed that the model Keynesian small open economy
theoretical foundations but also incorporates neo-classical supply side effects and
crucially for the Structural Funds analysis it incorporates mechanisms which are
based on the endogenous growth literature that capture the long-run impact of
Structural Funds investments. A further strength of this modelling framework is that
while it utilises a common structure for all regions and countries the individual
models are tailored to the specific region/country. Thus each model reflects the
peculiar economic structure of the particular region/country.

The evaluation of the 1994-1999 Objective 1 Structural Funds programmes yielded
some interesting results. In general the Structural Funds appear to have had a positive
impact both on GDP and on unemployment rates. However, some large differences

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