Place-based, Spatially Blind, or Both? Challenges in Estimating the Impacts of Modern Development Policies

Abstract

Two modern approaches to development policy have recently evolved and disputed with each other, namely, the space-neutral and the place-based approaches. Perhaps the most notable conceptual development common in these modern approaches is a strong awareness of the key role of geography in policies targeting aggregate economic growth. Thus, it became clear in the new policy thinking that the impact of countries' structural policies largely depends not only on the specific instruments (e.g., human capital development, infrastructure investments, and small-and medium-sized enterprises support) but also on the concrete patterns in which these instruments are deployed geographically. It is suggested in this article that macroeconomic models that integrate geography could usefully help policy makers in their choice among different complex geography-instrument mixes. I survey the most important modeling challenges raised by the two modern economic development approaches. To illustrate how economic models can respond to these challenges, I Downloaded from briefly introduce the Geographic Macro and Regional (GMR)-Europe model. To complete the illustration with a practical example, an impact analysis of a spaceneutral-place-based policy mix implemented in regions of the European Union (EU) is presented. It is found that promoting research excellence in leading agglomerations combined with human capital development in the rest of the regions in Europe could result in a sustained positive gross domestic product impact of EU Framework Programs at the aggregate EU level. Nevertheless, it is also important to emphasize that the aggregate impact masks marked regional differences.

RHOMOLO: A Dynamic General Equilibrium Modelling Approach to the Evaluation of the European Union's R&D Policies

“…In developing a spatial CGE approach, implementing it empirically for the whole EU at the regional level and demonstrating how it is operated, the paper partly fills the gap identified in the literature (BROECKER et al, 2001;BROECKER and KORZHENEVYCH, 2013;VARGA, 2015). The closest model to RHOMOLO is CGEurope (BROECKER and KORZHENEVYCH, 2013).…”

“…The sophisticated dynamics and inter-temporal optimization in a multicountry setting of QUEST allows for a calibration of RHOMOLO with respect to the macro-dynamics of QUEST. While the approach taken is not new and essentially follows the concept of Geographic Macro and Regional modelling (VARGA, 2015), what RHOMOLO adds is an empirically based coverage of changes in relative prices taking agglomeration and dispersion forces into account. The RHOMOLO dataset is complete for all NUTS-2 regions and consistent with national accounts and international trade data.…”

Advances in Regional Growth Forecasting Models

“…The effects of the two layers combine to generate regional growth: the regional, supply-side growth model also provides the potential gross domestic product (GDP) of the national one, whose structure is demand side in many respects but also incorporates some competitiveness, demand-side aspects that are homogeneous at country level. In the GMR model (Varga 2015, this special issue), the regional aspects interact with the national ones due to the interaction of three submodels, of which two are regional and the third is national. The national model borrows from the quarterly economic simulation tool (QUEST) III model a dynamic stochastic general equilibrium model at national level developed for the Eurozone (Ratto, Roeger, and in't Veld 2009).…”

The role of knowledge networks in regional development – Experience with an integrated model for the analysis of Hungarian regions

“…A GMR-modellkeret abból a célból került kialakításra és áll folyamatos fejlesztés alatt, hogy hozzájáruljon a fejlesztéspolitikai döntések meghozatalához ex ante és ex post forgatókönyv-elemzések segítségével (Varga [2015]). A GMR-modell fókuszá-ban olyan fejlesztéspolitikai beavatkozások állnak, mint a K+F-tevékenység támoga-tása, az emberi tőke fejlesztése, a vállalkozásfejlesztési politikák vagy a gazdaság szereplői közötti együttműködések fejlesztése.…”