European cohesion policy and the Spanish economy: A policy discussion case

Abstract

This paper offers an empirical evaluation of the economic effects of the European Structural and Cohesion aids received by Spain in the period 1989 through 2006 amounting to a total of almost €100 billion at 1999 prices. To that end, we use the HERMIN-Spain model. Our results suggest that these EU packages have contributed significantly to Spanish economic growth having increased the levels of income and promoting real convergence with the most advanced economies of the Union. The successive aid programmes produced an average increase of almost 0.4 percentage points in the real annual growth rate of the Spanish economy with respect to the situation that would have ensued without the European grants. This translates into an average increase in per capita income of €638 each year (at 1999 prices) over the entire period, and of €1027 per capita if we refer to the period 2000 through 2006. Without the structural aids, in 2006, the Spanish per capita income index relative to the average for EU-15 would be, ceteris paribus, almost 6 percentage points lower. The paper ends with a simulation of the likely consequences due to the reduction in structural and cohesion grants suffered by many Spanish regions that will cease to belong to the Objective 1 club after 2007 as a result of their natural or statistical convergence.