Modelling the EU Cohesion Policy: An example of TEN-T Infrastructure Investment Simulations with RHOMOLO

Using the RHOMOLO model, the present paper presents first simulation results of analysing the potential impacts of TEN-T projects in five EU Member States: the Czech Republic, Hungary, Germany, Poland and Slovakia for the programming period of ECP (2007-2013). Transport infrastructure is incorporated in the model via intra- and inter-regional transport costs, which are sector specific. TEN-T projects improve transport infrastructure, leading to a reduction in transport costs. Our simulation results suggest that the impact of investments in the TEN-T network in the five countries spread out over time. In the first place, these investments lead to significant reductions in transport costs in the areas where they take place but also in others given the general improvement of the transport network. In the medium and long term however, GDP gains progressively build up, because these investment need time to reach their full impact. Moreover, due to inter-regional spillovers, the positive impact on GDP slowly spreads in space to other neighbouring regions, even to regions where no investment took place (like for instance Zachodniopomorskie in north-western Poland). In the end, taking all direct and indirect effects into account, Polish and Hungarian regions gain most from these investments in the TEN-T network. Keywords: Economic Modelling, EU Cohesion Policy, regional development; economic geography. JEL classification: F1, O1, R3, R4.JRC.J.2-Knowledge for Growt