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

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Figure 1: Schematic outline of the HERMIN modelling approach

Apart from capturing the usual macroeconomic relationships, an important aspect of
regional modelling is that it needs to take account of spillovers, linkages and leakages
which are less important at the national level but which can have a substantial impact
at the regional level. This is particularly important for structural funds analysis since
such investments are likely to generate large-scale inter-regional demand and supply
spillovers.

For example, an investment may have an impact on the labour market by generating
additional employment. Of course, individuals may commute across regional
boundaries or may even migrate in order to find employment. Thus, an investment
may impact on the labour force by inducing migration and commuting. These type of
labour market impacts have been incorporated into the existing macro-region models.

The model functions as an integrated system of equations, with interrelationships
between all their sub-components. The essential core of the model consists of a
smaller number of equations, of which only about 20 are fully behavioural in the

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