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Integrating Economic Regional Impact Models

Final Report Summary - INTERIM (Integrating Economic Regional Impact Models)

Project INTERIM set out to develop the first fully integrated approach to regional economic input analysis. It sought to achieve this by linking together two powerful models, the econometric Input Output (EIO) and the Computable General Equilibrium (CGE) into a harmonized framework. The performance of the tool would be assessed by using data on European Structural funds in both sectors and regions. The new combined model will provide the first and most comprehensive evaluative tool for the Smart Specialization agenda in line with Europe 2020. The approach taken in this project will allow detailed sectorial information, but also include the unique spatial attributes of regions under investigation. The project took place in two phases, the first working with colleagues in the United States at the University of Illinois Urbana-Champaign who have significant experience of building this form of regional model.

The final phase will be based back in Europe at Cardiff University where the new model will be put through its paces before an online tool is contracted for policy makers and academics to utilize this powerful model.

The project set out with three core objectives, these are as follows:
i. Construction of a new integrated Econometric Input Output Computable General Equilibrium model.
ii. Assessment of how the external “shock” of structural funds affects the supply and demand relationships within a regions economic base.
iii. Implementation of an open source model capable of being utilized by all regions in Europe in line with the Smart Specialization agenda.

During the course of the project I have presented my work at the host institution’s REAL seminar series. These have provided me with critical, analytical discussions on both methodological and theoretical components of my work. I have been exposed to the work of 30 visiting Professors, which has taught me a significant amount about how to build and run complex economic models and has greatly influenced the direction of research. This interaction has lead to the development of a number of joint research papers with academics in both the US and Europe. In terms of formal training, I have undertaken expert workshops with Econometric IO modelers, which has aided in the initial estimations carried out for the parameterisation of my models. These classes have allowed me to better understand the most appropriate ways in which to operationalise the closure mechanism of the model. I have been involved in a number of dissemination activities both academic and practitioner based in both the US (British Consulate, Chicago) and Europe. I have also written a number of policy dissemination documents for the Welsh Government and this work has been cited in a number of high-level Government Committees.

Main Results Achieved

I have now built and successfully run a new EIO model with Welsh Data that allows long run Forecasts of employment and output. The Model has is identified as the Welsh Output Long-Run Forecast model or (WOLF). The model has yielded significant results and has been trialed on calibrated EU data. A working Matrix has also now be built and will appear in academic publications.

During the project, and subsequently I have appeared at workshops and conferences across Europe and the US and have presented the outputs and findings from project INTERIM. I have also submitted 4 journal papers to international peer reviewed publications.

Final Outputs

This project is extremely timely with the continuing world economic pressures and the introduction of Smart Specialisation by the EU in 2014. The model can now be used to assess the impact on the “selected” sectors in Wales and assessments as to the potential impacts from funding be assessed. The results also yield significant academic impacts and a journal paper currently in review based on the work of the project questions the use of multiple impact methodologies and the use of calibrated over estimated data.


All the projects objectives were not met and it is disappointing that the full integration of the models could not be achieved. However the project has delivered new scientific insights as to why this is not possible and provides academic outputs as to suggested directions for further research. Positively the work has introduced a new method not seen within structural fund assessments of pre sector selection by regions the Econometric Input Output model. This method has significant advantages to policy makers and researchers and is something that should be developed by other regions across Europe. Wales was a difficult test bed for this model and although some objectives were not met the outputs give a new insight into how researchers should use regional economic impact models.