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



the standard multiplier properties of the HERMIN model.3 However, the model also
has neoclassical features, mainly associated with the supply sub-component. Thus,
output in manufacturing is not simply driven by demand. It is also influenced by
price and cost competitiveness, where firms seek out minimum cost locations for
production (Bradley and Fitz Gerald, 1988). In addition, factor demands in
manufacturing and market services are derived using a CES production function,
where the capital/labour ratio is sensitive to relative factor prices. The incorporation
of a structural Phillips curve mechanism in the wage bargaining mechanism
introduces further relative price effects.

The schematic structure of the HERMIN model is illustrated in Figure 1. The
national accounts define three ways of measuring GDP: the output basis, the
expenditure basis and the income basis. On the output basis, HERMIN disaggregates
this into four sectors: manufacturing (OT), market services (ON), agriculture (OA)
and the public (or non-market) sector (OG). On the expenditure side, HERMIN
disaggregates into five components: private consumption (CONS), public
consumption (G), investment (I), stock changes (DS), and the net trade balance
(NTS). National income is determined on the output side, and disaggregated into
private and public sector elements.

Since all elements of output are modelled, the output-expenditure identity is used to
determine the net trade surplus/deficit residually. The output-income identity is used
to determine corporate profits residually. Finally, the equations in the model can be
classified as behavioural or identity. In the case of the former, economic theory and
calibration to the data are used to define the relationships. In the case of identities,
these follow from the logic of the national accounts that have important consequences
for the behaviour of the model as well.

3 Expectations in the HERMIN model are assumed to be autoregressive (i.e., static or backward-
looking). It should be noted that the Commissions own QUEST model contains forward-looking (or
model consistent) expectation mechanisms. These result in policy “crowding out” and much smaller
multipliers. But since the bulk of CSF expenditures are mainly on public goods (e.g., physical
infrastructure and education/training), it might be questioned if “crowding out” is fully relevant.



More intriguing information

1. Visual Perception of Humanoid Movement
2. The name is absent
3. EU Preferential Partners in Search of New Policy Strategies for Agriculture: The Case of Citrus Sector in Trinidad and Tobago
4. Dual Track Reforms: With and Without Losers
5. The name is absent
6. The name is absent
7. SOCIOECONOMIC TRENDS CHANGING RURAL AMERICA
8. Response speeds of direct and securitized real estate to shocks in the fundamentals
9. National urban policy responses in the European Union: Towards a European urban policy?
10. Studies on association of arbuscular mycorrhizal fungi with gluconacetobacter diazotrophicus and its effect on improvement of sorghum bicolor (L.)
11. Delivering job search services in rural labour markets: the role of ICT
12. Olive Tree Farming in Jaen: Situation With the New Cap and Comparison With the Province Income Per Capita.
13. APPLYING BIOSOLIDS: ISSUES FOR VIRGINIA AGRICULTURE
14. Financial Development and Sectoral Output Growth in 19th Century Germany
15. The Works of the Right Honourable Edmund Burke
16. Peer Reviewed, Open Access, Free
17. Experimental Evidence of Risk Aversion in Consumer Markets: The Case of Beef Tenderness
18. The name is absent
19. The name is absent
20. The magnitude and Cyclical Behavior of Financial Market Frictions