Working Paper: CEPR ID: DP17045
Authors: Javier Barbero Jiménez; Martin Christensen; Andrea Conte; Patrizio Lecca; Andrés Rodríguez-Pose; Simone Salotti
Abstract: We quantify the general equilibrium effects on economic growth of improving the quality of institutions at the regional level in the context of the implementation of the European Cohesion Policy for the European Union and the UK. The direct impact of changes in the quality of government is integrated in a general equilibrium model to analyse the system-wide economic effects resulting from additional endogenous mechanisms and feedback effects. The results reveal a significant direct effect as well as considerable system-wide benefits from improved government quality on economic growth. A small 5% increase in government quality across European Union regions increases the impact of Cohesion investment by up to 7% in the short run and 3% in the long run. The exact magnitude of the gains depends on various local factors, including the initial endowments of public capital, the level of government quality, and the degree of persistence over time.
Keywords: government quality; cohesion; economic growth; public investment; regions; EU
JEL Codes: C68; O17; R13; R15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Government Quality (L15) | GDP Growth (O49) |
| Government Quality (L15) | Effectiveness of Public Capital Investments (H54) |
| Effectiveness of Public Capital Investments (H54) | GDP Growth (O49) |