Regional general equilibrium modelling with forward-looking agents: an application to the 2014-2020 European structural regional investments

We investigate the effects of the 2014-20 European structural funds with a general
equilibrium model calibrated on the NUTS 1 regions of the EU. We assume forward-
looking agents to account for expectations and long-lasting effects of the policy. The
almost €260 billion of investments lead the European GDP to be 0.3% higher in 2022
than it would be in the absence of the policy. Interestingly, this effect is lower than
what a model with myopic agents would suggest. The regional distribution of the
differences in the GDP impacts between the two settings indicates that the largest
deviations are recorded for the net recipient regions, with interesting implications
regarding the policy credibility, the nature of the interventions and their duration.

Authors:

CRUCITTI F., LECCA P., MONFORT P., SALOTTI S.