Andrea Conte (p)

Lina Maddah

RHOMOLO is the spatial computable general equilibrium model of the European Commission focusing on EU regions. It has been developed and maintained by the Regional Economic Modelling team at the Joint Research Centre (JRC) in Seville in cooperation with Directorate-General for Regional and Urban Policy (DG REGIO). It is used for policy impact assessment and provides sector-, region- and time-specific simulations to support the EU policy on investments as well as reforms covering a wide array of objectives.
RHOMOLO covers all the EU NUTS 2 regions, disaggregating their economies into ten NACE rev.2 sectors, with a constant effort on data updating and maintenance. All the monetary transactions in the economy are included in the model as a result of agents making optimising decision. Goods and services are consumed by households, governments, and firms, and are produced in markets that can be either perfectly or imperfectly competitive. Spatial interactions between regions are captured through costly trade matrices of goods and services and factor mobility through migration and investments. This makes RHOMOLO particularly well-suited for analysing policies related to investments in human capital, transport infrastructure, and innovation.

Andrea Locatelli (p), Guido De Blasio, Giuseppe Albanese

Andrea Conte

In this paper we analyze the impact of EU cohesion funds on the TFP of Italian manufacturing firms between 2007 and 2013 (i.e., the years of the economic crisis). We focus in particular on the firms based in the regions of the South and Islands of the country (i.e., in the so-called “Mezzogiorno”). In order to do this, we use firm-level total factor productivity (“TFP”) data from the work by Emanuele Ciani, Andrea Locatelli and Marcello Pagnini (“TFP differentials across Italian macro-regions: an analysis of manufacturing corporations between 1995 and 2015.” Bank of Italy, Occasional papers no. 438, 2018), we aggregate it into a tfp measure at local labor market (LLM) level and we finally merge the productivity dataset with data on EU cohesion policy support, available at the aggregate level from the OpenCoesione website (https://opencoesione.gov.it/it/). As in Ciani-Locatelli-Pagnini, we explore different estimates of total factor productivity based on alternative measures of the production inputs: in particular, tfp is estimated using, alternatively, the number of employees or the cost of labor for the labor input, and the fixed-asset values from balance sheet data or an estimate obtained with the perpetual inventory method for the capital input. In order to identify the causal effect of the EU cohesion funds on firms’ productivity, we follow the strategy proposed by Emanuele Ciani and Guido De Blasio ("European structural funds during the crisis: evidence from Southern Italy." IZA Journal of Labor Policy 4.1 (2015): 20) using machine-learning techniques to select which controls to include in our regressions from a large set of time invariant local labor market characteristics interacted with linear and quadratic time trends.  Our preliminary estimates seem to suggest that the impact of EU cohesion funds on tfp was at most modest, with significance varying depending on the choice of input data used to estimate tfp (which is coherent with the findings by Julia Bachtrögler and Christoph Hammer. "Who are the beneficiaries of the structural funds and the cohesion fund and how does the cohesion policy impact firm-level performance?." OECD Working Papers ECO/WKP(2018)47). In the rest of the analysis we propose to investigate in which way the funds have impacted on the dynamics of aggregate productivity via a change in the average productivity of firms vis-à-vis through a reallocation of production inputs in favor of more productive firms (in the spirit of the dynamic Olley-Pakes decomposition proposed by Marc Melitz and Sašo Polanec in "Dynamic Olley‐Pakes productivity decomposition with entry and exit." The Rand journal of economics 46.2. 2015).

Lina Maddah (p), Josep Maria Arauzo Carod

Alexander Lemcke

Our contribution to the ongoing discussion on the importance of cultural and creative industries (CCIs) for regional economic development is threefold. First, we investigate the impact of CCIs’ specialization on total employment growth at municipality-level in Catalonia, using data from 2001 and 2011. This explicitly inspects the issues of agglomeration economies from an empirical point of view. In Catalonia, to the best of our knowledge, there is no study which investigates this issue on a local-level. This study is original in terms of the data used in the Catalan case, and the nature of the relationship under study. This provides an insight on the role of CCIs in the wider economy by focusing on the employment growth, which is a major concern for policymakers amid uncertain labor market conditions and the need for policymaking intervention. The Catalan case is of utmost interest in view that CCIs are of noticeable importance and, consequently, they are potentially capable to help local economies. We focus on what is happening in small and medium peripheral Catalan cities in addition to the capital, Barcelona, trying to identify and quantify how selected cultural activities / infrastructures located there are contributing to economic growth of their respective areas. Second, the study also marks out the spillovers of CCIs concentration to other economic activities as services, manufacturing, construction and agriculture, which further clarifies the nature and degree of influence of CCIs on diversified sectors that are major sub-components in the economy. Third, we direct the discussion on CCIs to the economic geography dimension by taking into account a methodological input using spatial econometric tools to account for spatial dependency and related concerns. This paper builds on data from Catalan Statistical Institute (IDESCAT) and Spanish Statistical Institute (INE) and uses econometric estimates and spatial analysis techniques to explore the impact on employment along with the respective spatial dynamics. Our first results corroborate our expectations in terms of cultural and creative industries as growth drivers for the whole economy, based on the methodology and data we use. Nevertheless, additional work is to be done in order to get consistent and complete results. The specialization in CCIs has a positive impact on total employment growth for Catalan municipalities between 2001 and 2011. It is noticeable that these results lead to some important policy implications. Roughly, they point to the relevance of public investments and public promotion of cultural and creative industries, however we question the capabilities/dynamism generated by these industries in terms of spatial spillover effects.

Federica Daniele, Taku Honiden , Alexander Lembcke (p)

Andrea Locatelli

Recent evidence based on cross-country analysis suggests that an increase in capital investment – in particular the use of automation and robots – can attenuate the negative impact of ageing on income levels. This belief is however misplaced when it comes to ageing in OECD TL3 regions. First, labour productivity in regions where ageing, measured by the ratio of the population who are at least 50 years old to “young” people aged 20‑49, increases 10 percent faster than the country average over the 2001-14 sample period are expected to have, on average, 2.1 percent lower productivity growth over the same period. The adverse impact on productivity is driven by predominantly urban TL3 regions, where labour productivity in the service sector is more severely impacted by demographic change. Additionally, ageing also has more direct consequences for GDP per capita growth that stem from the rise in the old dependency ratio. Enhanced productivity growth can offset the negative impact: this need for additional productivity growth is large compared to the actual growth rate experienced by most regions. Finally, ageing can have adverse consequence for redistribution: regions that aged faster also saw the fraction of income accruing to labour decline more dramatically.