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Enlargement and local development: the role of Structural Funds and International Financial Institutions Daniel Gros (CE

Enlargement and local development: the role of Structural Funds and International Financial Institutions Daniel Gros (CEPS) Convegno Unicredito Roma, July 9 2004. Structural Funds or the need for large public investment?. What level of infrastructure endowment is needed for catch-up growth?

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Enlargement and local development: the role of Structural Funds and International Financial Institutions Daniel Gros (CE

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  1. Enlargement and local development: the role of Structural Funds and International Financial Institutions Daniel Gros (CEPS) Convegno Unicredito Roma, July 9 2004

  2. Structural Funds or the need for large public investment? • What level of infrastructure endowment is needed for catch-up growth? • Level of present EU-15 would seem excessive. • Economic approach look at empirical link between level of GDP and infrastructure.

  3. Regression Results Source: own calculations. All variables are in logarithm. All standard errors are corrected heteroskedasticity-consistent. The symbols: *, **, ***, **** indicate coefficients that are significant at the 10%, 5%, 1% and 0.1% level, respectively. (a) Additional explanatory variable: population density, 118 observations. 1999 data.

  4. Infrastructure needs: a second approach • Alternative method: • Look at utilization rate of existing infrastructure. • For example, road and railway usage.

  5. Idle capacity on rails and roads? Source: own calculations based on data from New Cronos.

  6. What is being spent in reality? • The new member states spend only a bit more than the “old” EU-15. • Revealed preference? Shows that need can be covered without the need for large flows of funds from the EU?

  7. Share of gross fixed capital formation by general government in GDP Source: Commission, DG ECFIN, Statistical Annex, Spring Forecast, 2004.

  8. Concluding remarks • Need for (hard) infrastructure often over-estimated. • What to do with Structural Funds?

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