Macro-Regional Evaluation of the Structural Funds Using the HERMIN Modelling Framework

The structural fund interventions play a crucial role in improving the social and economic cohesion of the EU. A particular focus of the structural funds is on Objective 1 regions that lag behind to the extent that their GDP per capita is below 75 per cent of the EU average. The amount of investment that is funded though the Structural Funds by the EU is substantial and consequently EU legislation requires the appraisal of the structural funds. However, while systematic monitoring and evaluation frameworks are available at the national level and at the project level, a rigorous and systematic method for quantifying the socio-economic impacts of structural fund interventions on the regional economies has not been developed to the same extent. One modelling framework - HERMIN - has been widely applied to Structural Fund analysis at the national level and macro-regional level. The HERMIN framework is based on a small open economy model. Importantly, it incorporates mechanisms which are based on the endogenous growth literature, which allow it to capture the long-run supply side impact of the Structural Funds along with the short run Keynesian impact.