WRITTEN QUESTION E-0895/98 by Daniela Raschhofer (NI) to the Commission (26 March 1998)

Subject: Study of the socio-economic impact of the Cohesion Fund

The London School of Economics was commissioned in June 1995 to draw up a study on the impact of the Cohesion Fund (6/SG.H/1994 'Study of the socio-economic impact of Cohesion Fund projects'). The study was completed and sent to the Commission in January 1997.

1. What fundamental, new findings did the study put forward?

2. What influence have the findings had on the further evaluation of the Cohesion Fund projects?

3. To what extent are the findings of the study reflected in the current programming period?

4. How much were the fees for compiling the study?

Answer given by Mrs Wulf-Mathies on behalf of the Commission (24 April 1998)

The study in question was initiated by the Commission in response to the requirements of Regulation (EC) No 1164/94 of 16 May 1994 establishing a Cohesion fund ((OJ L 130, 25.5.1994. )). This specifies not only that individual projects should be systematically appraised before approval for assistance, but also that the Commission should report annually on the economic and social impact of the fund.

The principal aim of the study was to develop new methods for assessing the socio-economic effects of assisted projects. Following a competitive tender procedure, the contract to undertake the study was awarded to the London School of Economics and Political Science (LSE) in July 1995. A revised final report on the study - consisting of a literature survey, database report and modelling report - was submitted to the Commission in December 1996 and was formally accepted in early 1997. A presentation of the report to representatives of the Member States, the Parliament, the Court of Auditors, the European Investment Bank and others took place on 12 June 1997.

1. The LSE economists have developed three distinct modelling approaches for quantifying the impact of infrastructure investments in the fields of transport and the environment: vector autoregression models, computable general equilibrium models and models of distribution dynamics. These are innovative to the extent that they use the latest available econometric techniques and are based on a detailed regional structure. Among the results to have emerged from the study are the following:

- based on historical trends, it has been established that public infrastructure investment in the cohesion Member States has generated a substantial increase in private investment and, hence, in regional and national economic activity;

- the study also provides evidence of significant employment generated by assisted projects, including both short-term jobs during the construction phase and longer lasting jobs during the operational phase;

- in the case of transport infrastructure investments, the models can identify their impact on regional and national income stemming from their effect on transport costs and the consequent improvement in regional competitiveness, industrial relocation and migration;

- the estimated income effects from project simulations have been found in many cases to exceed the estimates derived from more traditional approaches to project appraisal such as cost-benefit analysis;

- the models highlight important economic spillover effects of investments between regions and between the cohesion Member States and the rest of the Community.

2. The results of the study are still being evaluated and some of the models are being further refined. However, they are already being applied to a comprehensive range of projects financed by the Cohesion fund. The overall aim is to provide a systematic assessment of the impact of assisted projects using comparable methods in all of the cohesion Member States. It is envisaged that these results will be used as a complement to other approaches, such as cost-benefit analysis, in the ex-ante appraisal of projects submitted for assistance and, particularly, in ex-post evaluation of their impact.

3. The results of the study are relevant in the context of the assessment of the general effectiveness of structural policies. Although developed specifically for projects financed by the Cohesion fund, the models can equally be used to evaluate the impact of other similar infrastructure investments supported by the structural funds or other Community financial instruments.

4. The cost of the study was ECU 674 404. The final report on the study is publicly available. A copy is sent direct to the Honourable Member and to the Parliament's Secretariat.