The Potential Impact of EU Cohesion Policy Spending in the 2007-13 Programming Period: A Model-Based

Summary for non-specialistsThis paper provides an assessment of the potential macro-economic impact of Cohesion Policy using a microfounded dynamic general equilibrium model with semi-endogenous growth and endogenous human capital accumulation and considers the impact of co-financing condition and faster absorption of funds.EU Cohesion policy supports investment in infrastructure, R and D and human capital in Europe's poorer regions. This paper provides a model-based assessment of the potential macro-economic impact of these fiscal transfers using a microfounded dynamic general equilibrium model with semi-endogenous growth and endogenous human capital accumulation. The simulations show the potential benefits of Structural Funds with significant output gains in the long run due to sizeable productivity improvements. Co-financing conditions are found to raise the long term output effects. Delays in spending profiles lead to lower gains.