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Modelling and evaluating the socio-economic impacts of research and innovation with the suite of macro- and regional-economic models

Periodic Reporting for period 2 - MONROE (Modelling and evaluating the socio-economic impacts of research and innovation with the suite of macro- and regional-economic models)

Reporting period: 2018-01-01 to 2019-03-31

MONROE's major aim has been to provide a sound empirical basis and advanced modelling tools in order to facilitate the design of smart and efficient Research and Innovation (R&I) policies and programmes.

Related to this is the development an interactive online toolkit that aims to improve the understanding of R&I impacts in the society and encourage collaboration between different societal actors in the area of R&I policies and programs.

This is done in order to help the European Union to find untapped sources of growth and employment and renew the legitimacy of public policy-making through greater citizens’ involvement.

In more detail, MONROE's' overarching objectives are the following:
- To develop and use a combination of various modelling approaches (DSGE, macro-sectoral CGE, macro-econometric and regional-economic NEG) in order to provide policy-makers, businesses and other societal actors with the sound and reliable evidence base for the various impacts of R&I and R&I policies and programmes.
- To develop and use empirical econometric approaches on micro-economic and macro-economic datasets using time-series and panel data approaches in order to estimate the main parameters of macro-economic models using specific European, national and regional data. This will largely improve the quality of R&I policy evaluations using the developed modelling tools.
- To increase societal knowledge and raise awareness of the importance of R&I for such things as economic development, employment generation and sectoral competitiveness via the construction and dissemination of the interactive online toolkit.
The work performed during the two years of the project's lifespan has largely fallen in line with what was originally envisaged and sketched out in the DoA. Both theoretical as well as extensive empirical and applied work has been carried out.

Roughly speaking, the first year consisted mainly of laying down the foundations of the core of the project by engaging in two main strands of activities:
1) Setting up of the project's management and dissemination infrastructure.
2) Extensive literature review, preliminary model formulation and data collection.

The second year saw the more substantive work being carried out, by engaging in five main strands of activities
3) Addressing the concerns raised at the first periodic review by revising a number of 1st-year deliverables
4) Empirical work on estimating key model parameters
5) Producing code for the various R&D modules and the DSGE model
6) Formulation of policy scenarios and model simulation
7) Creation of the online tool

With regard to the main results achieved, these are reflected in the production and timely submission of all the planned deliverables.
In terms of the numbered points above, the respective main relevant outputs are:
1)- A Communication Plan and the associated project website and social media accounts. Also, we laid out the preliminary specifications of the online interactive tool.
- A Data Management Plan
- A Impact and Innovation Plan
2) A series of working papers, mainly describing the theoretical underpinnings of the new models, as well as a number of datasets that were used in the estimation of the said models.
3) Revision of the following working papers:
D.2.2.1 Working paper examining productivity fluctuations in countries which only perform technology transfer rather than R&D
D.2.3.1 Working paper on examining medium frequency cycles in non-frontier countries
D.2.5.1 Working paper on market imperfections and institutional bottlenecks in incentivising R&I
D.2.6.1 Working paper introducing endogeneity in the complementarity between information technology and skill biased technical change.
D.3.2.1 Working paper describing the approach to and application of spatial heterogeneity
D.3.4.1 Working paper describing the methodology to incorporate human capital and intangible assets in the CGE model
4) A large number of estimated parameters needed for the R&D modules of each model.
5) All models fully coded
6) One common scenario for all the models, as well as model-specific scenarios
The progress beyond the state of the art consists of:
- New methodological and theoretical insights, elaborated in a series of working papers
- Empirical estimation of several key parameters needed for the models
- Enhanced representation of R&I policies in applied macro-economic models
- The creation of an interactive online tool that allows people to assess various economic effects of R&I policies in a visually attractive and compelling way

It is hoped that the publicly available code and data of the project's enhanced models, as well as the new theoretical, methodological and empirical insights generated, will spur on further work by researchers in the field. In addition, we believe that the project's novel, user-friendly interactive online toolkit will help users further appreciate the role of R&I and R&I policies.