Evaluation Methods of European Regional Policy and Reasons for Different Outcomes

It is a very generally accepted view that financial support received from the European Union generates a large growth surplus. The potential effects of the structural funds calculated in model simulations carried out by the European Commission support these positive expectations. However empirical studies of the real effects of the funds are few and far between measuring the growth surpluses attributed to the process of catching up with richer EU economies. The aim of the present paper is to remedy this contradiction, on the following logical basis. First of all the paper examines the processes and types of evaluation that have developed in the EU; it then examines some of the lessons to be drawn concerning the methods of analysis through a closer look of case studies, model simulations and econometric analyses employed. We can state that examinations based on computable general equilibrium models and input-output analyses predict greater growth effects than studies using regression analysis. This is primarily due to the fact that while the results of the model simulations estimate an upper limit for the expected effects – the result that is to be expected if the funds are used appropriately and efficiently –, the results of the econometric analyses reflect the imperfections of real events. The estimates from the first type of study are expected to be higher than the estimates of the second. The differences are not necessarily inconsistent. Rather, the various results are complementary: the potential impact can be set against the actual impact. To bridge the gap is of course the challenge of future reforms of cohesion policy. The conclusion that emerges is that the regional policy intentions are only partly realised, for various reasons, including the crowding out effect of the financial aid, rentseeking behaviour and the moral hazard of the governments involved.