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R&D, Human Capital and Regional Growth: illustrations with the help of an SCGE model

R&D, Human Capital and Regional Growth: illustrations with the help of an SCGE model Andries Brandsma Ben Gardiner d’Artis Kancs Enrique Lopez Bazo Fabio Manca Giuseppe Piroli. Outline. Context Models used for cohesion policy evaluation Court of Auditors report

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R&D, Human Capital and Regional Growth: illustrations with the help of an SCGE model

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  1. R&D, Human Capital and Regional Growth: illustrations with the help of an SCGE model Andries Brandsma Ben Gardiner d’Artis Kancs Enrique Lopez Bazo Fabio Manca Giuseppe Piroli

  2. Outline • Context • Models used for cohesion policy evaluation • Court of Auditors report • Gaps in modelling capability • Regional CGE model • Where does RHOMOLO fit in existing context • Main features: R&D and human capital • Advantages and disadvantages • Conclusions • Combination of models • How to fit R&D into cohesion policy

  3. Background • Previous modelling exercises • Partial equilibrium and macroeconomic studies • Extensive use of HERMIN model • Court of Auditors Report (2006) • Match sectoral coverage with cohesion policy • Towards greater use of econometrics • Allow for growth hubs; less reliance on spillovers • Estimates based on EU data • Barca report (2009) • Refocus on core priorities • Re-emphasise place-based policy

  4. Court of Auditors, Special Report No 10/2006 …structural instability of the parameters estimated may be a significant limitation of the macro model-based approach adopted …appears unsuited to the task of estimating the effects of SF interventions in Objective 1 regions …it is not clear to what extent the estimates are based on judgment or on fact

  5. Gaps • Integrated modelling • Move away from purely economic focus • Other important themes emerging: sustainability • Sub-national analysis • NEG theory • SCGE model (go down at least one level; place-based policy; multi-level governance; no loaded dice) • Empirical validation • Lack of reliable regional time series data • More reliance on economic theory to provide missing links

  6. Scope of the RHOMOLO Model

  7. Real GDP change due to TEN-T investment: Short Run page 11

  8. Real GDP change due to TEN-T investment: Medium Run page 12

  9. Real GDP change due to TEN-T investment: Long Run page 13

  10. Non-GHG relative change due to TEN-T investment page 14

  11. Limitations of CGE Modelling • Data availability • There are no interregional trade data • Coverage within Member States rather than across • Region x sector disaggregation stretches limits of data-filling, even with entropy techniques • Treatment of R&D and innovation • Stressed through Innovation Union and link to Europe 2020 • Many ways of representing the chain of innovation, but only few available when modelling at regional level • Reliance on other models • Transport, energy, land use, climate change • Macroeconomic projections (and impact studies) as backbone • Flexible architecture for sectoral disaggregation

  12. Conclusions • SCGE model useful tool for covering regional pattern of policy effects, including interregional flows • But not for generating the aggregate impact over time • Dovetailing the results of macroeconomic and SCGE models is not a trivial task • But it can be done

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