IPTS/SUSTAG University of Patras

1. Demonstration of the capacity of a bi-regional CGE model to assess impacts of the Rural Development Policy measures IPTS/SUSTAG University of Patras

2. Objective Demonstration workshop on a bi-regional CGE approach - Introduction • to present the elements and characteristics of the Bi-Regional (rural/urban) Computable General Equilibrium (CGE) methodology • to demonstrate its capacity to assess the spatial impacts of Axis 3 Rural Development Policy (RDP) measures • to discuss possibilities • of further development of such an approach • its integration in the policy analysis (incl. which improvements are needed)

3. AGENDA Demonstration workshop on a bi-regional CGE approach - Introduction

4. Background of the workshop Tomas Ratinger IPTS/SUSTAG

5. Needs for RD modelling Demonstration workshop on a bi-regional CGE approach - Introduction • result from the needs for assessing the (ex-ante, ex post) impact of rural development policies • on rural areas and the other areas (economies): e.g. economic growth, employment, migration, … • on actors (recipients and the other): sectoral income, household income,… •  to assess the effectiveness and efficiency of policy measures •  to assess the needs for and benefits of modifying policy measures

6. General requirements on models Demonstration workshop on a bi-regional CGE approach - Introduction • a model is a theoretical construct that represents economic processes • models are simplified frameworks designed to illustrate complex processes • to be policy relevant • to have variables, parameters able to reflect policy measures • calculations to be repeatable with changed parameters (simulation of scenarios) • to be reliable and robust • and the way how to demonstrate it • to be operational • under the terms of use, frequency, type of analyses, …

7. Requirements on models for RDP Demonstration workshop on a bi-regional CGE approach - Introduction • to incorporate the spatial dimension • since rural areas are diverse territories • rural areas are linked to other areas • to be multi-sectoral, multi-institutional • since RD policy addresses more sectors than only agriculture • instruments (e.g. investment support) may stimulate/ have impacts on the other sectors (e.g. construction) • some measures have non-economic objectives (e.g. improving quality of life) • (DG AGRI.L2 specific) • to provide results which can be used for EU policy making (coverage of territories and issues) • to provide mid-term forecast • to aim at Axis 3 measures

8. Axis 3 impact assessment Demonstration workshop on a bi-regional CGE approach - Introduction • Policy Issues (measure objectives, instruments, recipients) • Diversification of rural economy • Investment support for micro enterprises (agric. (311), non-agric (312)) • Encouragement of rural tourism (313) • Improving the quality of life in rural areas (basic services, village renewal (322), cultural heritage) • Areas of impacts and impact assessment indicators • Stabilisation of settlement, migration (in, out)?, • Balanced economic structures, employment (structure, growth), GDP (structure, growth)?, • Income of households ( and its distribution)? • Interregional differences in policy impacts: distribution of support, income, inequitable regional development (lagging RA) • Rural urban relationship

9. Approaches to the spatial dimension Demonstration workshop on a bi-regional CGE approach - Introduction • Full coverage by regional models • Set of typical regional models selected using a typology • Distinction of rural economies • Classification of model regions (≥NUTS3) e.g. using the OECD typology as PR, IR, PU • Separation of rural and urban areas in model regions

10. Spatial approaches I/O model for selected regions A flexible typology of EU Rural A. From spatial analysis to socio economic modelling Policy impact assessment TERA SIAP From socio economic modelling to spatial analysis RURMOD-E, CAPRI-RD Bi-regional CGE model for selected regions Full NUTS2 coverage CGE model Demonstration workshop on a bi-regional CGE approach - Introduction

11. Selection of the model approach Demonstration workshop on a bi-regional CGE approach - Introduction • Review of models • Project Review of typologies … • Project TERA-SAIP • SUSTAG own survey of models suitable for Axis 3 measures analysis • Criteria for selection • Suitable for Axis 3 measures and assessment of related indicators of their performance – • sufficient level of details (both spatial, as well as structural) • General equilibrium based • Already operational, built on relatively recent data, well documented • Potential to be adjusted to policy analysis needs

12. Bi-Regional CGE (TERA FP6 project) Demonstration workshop on a bi-regional CGE approach - Introduction • Objective: to model rural-urban relationship. It considers a range of policies to be assessed by the instrument: • dealing with distance (e.g. transport policies, other communications) • CAP Pillar1 • externalities • Special focus • rural-urban relationship with a particular focus on distance (remoteness) • Model features • Comparative static CGE • transport and transport sector is modelled explicitly; • transport cost links R and U housing markets • household are broken down in three categories: having job locally, commuting within the region and commuting out of the region; • labour is differentiated according to location and skill • the two regions (remote rural and urban) are treated as one single economy • SIA characteristics • smaller regions (NUTS4/5), RA-UA pairs, 6 case studies (CZ, FI, GR, IT, LV, UK)