In 2018, the then minister delegate for European affairs of Romania, Victor Negrescu, visited UAIC and made the following statement: 'Romania remains a strong supporter of the Cohesion Policy, a successful financial instrument, that all Member States benefit from, closely linked to the common values that we share. Each invested euro returned 2.74 euros, which translated at European level, for the 2007-2013 period alone, in a million new jobs, 400,000 start-ups or 33,500 kilometres of newly built or refurbished roads. Romania received 40.87 billion euros from the European Union, in the 2007-2016 period, with a net return of 27.1 billion euros" underlined the minister delegate for European Affairs.' The accuracy of the figure gave it an appearance of scientific rigour, which made me curious about where it came from and what it really meant...
How can the European Commission claim that one euro invested in cohesion policy generates 2.74 euros?
As firms and people start earning more, they also invest and consume more (the so called Keynesian multiplier effect).
Accounting for the increased productivity in the economy that continues long after capital spending is over (10+ years).
Excluding the European Social Fund, one of the three cohesion funds that allegedly "invests" in people.
Relying on the simulations of a New-Keynesian dynamic general equilibrium (DGE) model instead of real observed data.
Assuming that EU regional fund investments are as productive as others in the same categories.
Paying an independent external consulting firm to do the study.
Total votes: 75
Background:
Learning objectives:
Understanding the Keynesian multiplier effect.
Understanding the supply-side effect of capital investment.
Understanding general-equilibrium models.
Knowing the three main funds for EU cohesion spending, their similarities and differences.
Understanding the concept of internal rate of return and the difference for different investments.
Understading the impact of time on the rate of return of investments.
Understanding the differences between measurement and simulation.
Understanding public goods and public spending waste.
Understanding conflicts of interest in scientific research.
Presentation videos: