Week five - regional and cohesion policy Flashcards
what are the two main theoretical frameworks for economic activity
1) neoclassical model
- effective functioning of the market leads to convergence
- self-correcting in the long-run
- economic policy should eliminate hurdles to factor mobility
2) agglomeration economies
- neoclassical theory of limited value
- development is accumulative
- economic policy should intervene to reduce divergence
the degree of agglomeration in economic activity depends on the magnitude of which two forces
- agglomeration forces: those the promote spatial concentration in economic activity
- dispersion forces: those that promote spatial dispersion in economic activity
example of something that causes spatial dispersion in economic activity
- transportation costs
- trade protectionism
what are the two main agglomeration forces
- abundant demand
- reduction in production costs
what are the implications of a reduction in protectionism and transport costs
- dominance of agglomeration forces
- divergence between advantaged regions and those less developed
is agglomeration stronger or weaker than dispersion
stronger (most developed centres have the advantage)
what are the arguments in favour of regional policy
- equity and solidarity: income redistribution and unemployment reduction
- political: social, territorial and political cohesion
- improve the coordination of national regional policies
- benefits of the economic activity of other regions
what are the main regional disparities in the EU
- less developed rural areas
- industrial decline: textile, coal, iron…
- congested areas
- border areas
- increase in disparities with the entry of Eastern countries
why has economic development been very uneven throughout the territory
- differences in physical characteristics and factor endowment
- external shocks
- government decisions
what are the five main stages of CRP in the EU
- phase 1 (1957-1974): Rome Treaty –> reconsider CRP after first enlargement
- phase 2 (1975-1987): creation of European Regional Development Fund
- phase 3 (1988-2006): consolidation of CRP (redistribution and cohesion policy/agenda 2020)
- phase 4 (2007-2013): relationship with growth and competitiveness objectives - renewed lisbon strategy
- phase 5 (2014-2020): relationship to 2020 strategy
what was the rome treaty’s relation to the CRP
- recognised that one of the objectives should be the promotion of harmonised economic activity
- emphasis on the creation of customs union
- no large inequalities between founding members
- confidence in the market as a mechanism that self-corrects
what were the two instruments for CRP in the Rome treaty from 1957-1974
- european social fund (ESF): objective to promote employment
- european investment bank (EIB): investment in less developed regions
what events increased the relevance of CRP between 1957-1974
- enlargement (UK and Ireland joined), economic crisis in 1973
- increasing concern for CRP
- thompson report (1973): uneven regional development, more emphasis should be put on reducing disparities, solving problems of rural areas and industrial restructuring
when was the creation of the european regional development fund and what is it
1975, to support regional policies of member states and budget instrument to support less developed regions and declining industrial areas
what increased the relevance of the CRP between 1975-1987
- the creation of the european regional development fund
- 1981: first report of the impact of the policies
- enlargements: Greece (1981) and Spain and Portugal (1986)
when was the single european act signed and what is the objective of it
1986, creation of a single market
what happened to the structural funds within the CRP between 1988-1999
reformation of the structural funds: ESF + EAGGF-Guidance + ERDF integrated into a global cohesion policy based on:
1) partnerships (between commision/national/local/regional)
2) additionality: european spending must not replace national spending, only complement it
3) programming: multiannual national programs aligned on EU priorities
4) concentration: focussing the interventions on the less developed regions and specific problems
what else happened to the CRP between 1988-1999
- the budget allocation doubled in real terms
- treaty on the EU (Maastricht): new funding (cohesion fund), new institution (committee of the regions
what happened to the CRP between 2000-2006
- more enlargement (new countries will be given funding prior to joining)
- CRP loses weight in the budget as austerity increases on the european level
- new reform of SF: spending is concentrated on regions that need it the most
- new reform is linked to the lisbon strategy (agenda 2020)
- change in priorities towards growth, employment and innovation
what happened to the CRP between 2007-2013
- new projects linked to growth and employment objectives (renewed lisbon strategy)
- more coordination of financial instruments
- bigger concentration in a more limited number of regions
what happened to the CRP between 2014-2020
- simplified rules and focus more on outcomes
- europe 2020 strategy, growth: smart, sustainable, inclusive
- more focus on: research/innovation, making SMEs more attractive, moving towards a low- carbon economy, digital agenda
what were the five CRP objectives for 2020
1) 75% employment for those aged 20-64
2) invest 3% of EU’s GDP in R&D
3) climate:
- 20% reduction in greenhouse gas emissions relative to 1990
- 20% of energy from sustainable sources
- increase energy efficiency by 20%
4) reduce school drop out rate under 10%
5) fight against poverty and social exclusion
what are the three structural funds in the CRP up to 2006
- ERDF: infrastructure, innovation and investments
- ESF (european social fund): skill upgrading and employment promotion
- EAGGF-Guidance: rural development and improvement of agricultual infrastructure
what are the cohesion funds and when were they created
- 1993, to help less developed countries meet the Maastricht convergence criteria, aimed at transport and environmental infrastructure and renewable energy development
- national, not regional
- distribution based on population, GDP
