The Impact of European Structural Funds in the South of Spain

Abstract

Over the last decades, the European Union has contributed to the development of poor regions of the Associate Members. This is the case of Andalusia, an Objective 1 region for the European regional policy in the south of Spain. In this paper we carry out an impact analysis of the European Regional Development Fund (ERDF), one of the most important Structural Funds, to the object of assessing its effect on aggregate and sectoral production, price indexes and consumers’ welfare. To this extend we compute an Applied General Equilibrium Model (AGEM) and we present a counterfactual analysis with simulations for three representative years: 1990, 1995 and 1999. We conclude that regional funding has deeply contributed to Andalusian regional development and the effectiveness of the funds seems to be larger for the last years of the study.

Acknowledgements

The authors are grateful to the “Excellence Research Project” SEJ-01252 and SEJ-246 both from Junta de Andalucía and XT0039-2004 from Generalitat de Catalunya. The second author also thanks SEC2003-05112 from the Spanish Ministry of Science and Technology.

Notes

Commission Decission (1999).

Consejería de Economía y Hacienda (2001).

Total Average Population and Regional Gross Domestic Product, Eurostat.

Regional Gross Domestic Product (PPS per inhabitant in percentage of the EU-27 average), Eurostat.

For details about this methodology see, Robinson et al. (2001).

Further technical details about the model such as the behaviour of the government, the saving/investment or the foreign sector; as well as the specific calculation of the parameters in the calibration process, see Lima and Cardenete (2005b).