Demonstration of the capacity of a bi-regional CGE model to assess impacts of the Rural Development Policy measures

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Demonstration of the capacity of a bi-regional
CGE model to assess impacts of the Rural
Development Policy measures

• IPTS/SUSTAG
• University of Patras

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Objective

• to present the elements and characteristics of
  the Bi-Regional (rural/urban) Computable General
  Equilibrium (CGE) methodology
• to demonstrate its capacity to assess the spatial
  impacts of Axis 3 Rural Development Policy (RDP)
  measures
• to discuss possibilities
• of further development of such an approach
• its integration in the policy analysis (incl.
  which improvements are needed)

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AGENDA
Time Subject/presentation Presenter
930 Opening and introduction of participants Tomas Ratinger (IPTS)
940 Introduction of the background of the workshop, Tomas Ratinger
955 Introduction to the bi-regional CGE model Dimitrios Psaltopoulos (U Patras)
1025 Introduction to the Czech and Greek case study regions and their reflection in the model structure Eudokia Balamou (U Patras)
1100 Coffee break
1115 Implementation of policy measures and policy scenarios Dimitrios Psaltopoulos
1145 Presentation of results i) policy measure perspective ii) regional development perspective Eudokia Balamou/ Dimitrios Psaltopoulos
1245 Lunch
1400-1630 Discussion on the future development Chaired by Tomas Ratinger
Summary of pros and cons of the demonstrated approach Necessary improvements to make the approach useful for policy Assumptions, robustness, sensitivity analysis Spatial aspects and data requirements
Free discussion on future development of modelling instruments for the impact assessment of rural development policy measures (Axis 3)
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Background of the workshop

• Tomas Ratinger
• IPTS/SUSTAG

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Needs for RD modelling

• result from the needs for assessing the (ex-ante,
  ex post) impact of rural development policies
• on rural areas and the other areas (economies)
  e.g. economic growth, employment, migration,
• on actors (recipients and the other) sectoral
  income, household income,
• ? to assess the effectiveness and efficiency of
  policy measures
• ? to assess the needs for and benefits of
  modifying policy measures

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General requirements on models

• a model is a theoretical construct that
  represents economic processes
• models are simplified frameworks designed to
  illustrate complex processes
• to be policy relevant
• to have variables, parameters able to reflect
  policy measures
• calculations to be repeatable with changed
  parameters (simulation of scenarios)
• to be reliable and robust
• and the way how to demonstrate it
• to be operational
• under the terms of use, frequency, type of
  analyses,

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Requirements on models for RDP

• to incorporate the spatial dimension
• since rural areas are diverse territories
• rural areas are linked to other areas
• to be multi-sectoral, multi-institutional
• since RD policy addresses more sectors than only
  agriculture
• instruments (e.g. investment support) may
  stimulate/ have impacts on the other sectors
  (e.g. construction)
• some measures have non-economic objectives (e.g.
  improving quality of life)
• (DG AGRI.L2 specific)
• to provide results which can be used for EU
  policy making (coverage of territories and
  issues)
• to provide mid-term forecast
• to aim at Axis 3 measures

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Axis 3 impact assessment

• Policy Issues (measure objectives, instruments,
  recipients)
• Diversification of rural economy
• Investment support for micro enterprises (agric.
  (311), non-agric (312))
• Encouragement of rural tourism (313)
• Improving the quality of life in rural areas
  (basic services, village renewal (322), cultural
  heritage)
• Areas of impacts and impact assessment indicators
• Stabilisation of settlement, migration (in,
  out)?,
• Balanced economic structures, employment
  (structure, growth), GDP (structure, growth)?,
• Income of households ( and its distribution)?
• Interregional differences in policy impacts
  distribution of support, income, inequitable
  regional development (lagging RA)
• Rural urban relationship

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Approaches to the spatial dimension

• Full coverage by regional models
• Set of typical regional models selected using a
  typology
• Distinction of rural economies
• Classification of model regions (NUTS3) e.g.
  using the OECD typology as PR, IR, PU
• Separation of rural and urban areas in model
  regions

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Spatial approaches
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Selection of the model approach

• Review of models
• Project Review of typologies
• Project TERA-SAIP
• SUSTAG own survey of models suitable for Axis 3
  measures analysis
• Criteria for selection
• Suitable for Axis 3 measures and assessment of
  related indicators of their performance
• sufficient level of details (both spatial, as
  well as structural)
• General equilibrium based
• Already operational, built on relatively recent
  data, well documented
• Potential to be adjusted to policy analysis needs

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Bi-Regional CGE (TERA FP6 project)

• Objective to model rural-urban relationship. It
  considers a range of policies to be assessed by
  the instrument
• dealing with distance (e.g. transport policies,
  other communications)
• CAP Pillar1
• externalities
• Special focus
• rural-urban relationship with a particular focus
  on distance (remoteness)
• Model features
• Comparative static CGE
• transport and transport sector is modelled
  explicitly
• transport cost links R and U housing markets
• household are broken down in three categories
  having job locally, commuting within the region
  and commuting out of the region
• labour is differentiated according to location
  and skill
• the two regions (remote rural and urban) are
  treated as one single economy
• SIA characteristics
• smaller regions (NUTS4/5), RA-UA pairs, 6 case
  studies (CZ, FI, GR, IT, LV, UK)