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Macroeconomic evaluation of EU R&I Policies : ways and Means

Abstract : This PhD thesis describes the R&I mechanisms that the macroeconomic models QUEST III, NEMESIS and RHOMOLO incorporate, and how these models are used to evaluate the R&I policies that are introduced and monitored by the General Directorate for R&I of the EC. QUEST III, NEMESIS and RHOMOLO are models belonging to different economic traditions, and also possess different levels of detail. QUEST is a macroeconomic Dynamic Stochastic General Equilibrium (DSGE) model, the most in line with modern macroeconomic theory. There is one model for every EU(28) country, with microeconomic foundations explicitly derived from inter-temporal profit and utility maximization under perfect foresight, as in the general equilibrium setting of modern theoretical models of economic growth. NEMESIS is, like QUEST, a model for every EU(28) country, but the two models are very different in their modeling approach. NEMESIS is a macro-sectorial model (30 sectors) of neo-Keynesian inspiration. There are adjustment costs, adaptive expectations, wage rigidities and exogenous exchange and interest rates, which prevents the model from describing a general equilibrium, even in the long-run. RHOMOLO, is a spatial model based on the new economic geography theories and is the more detailed geographically, as it describes the general equilibrium modeling of 267 EU regional economies and their interactions. This model also has a sectorial dimension and each region contains 10 economic sectors. Like NEMESIS, the great level of detail of RHOMOLO, prevents any forward-looking dynamics, and both models are solved according to a recursively dynamic approach. To model innovation, what the three models have in common is that they were inspired by the strong empirical evidence, that investments in R&D were at the origin of major technological innovations and TFP growth in advanced industrialized countries over the past decades. On the theoretical side, they all also refer, explicitly or implicitly, to the New Growth Theories that have emerged from the beginning of the 1990s. NEMESIS, that is grounded on empirics, is certainly the model that includes the richest mechanisms of technical change, with, notably, the recent extension of the innovation mechanisms of the model to the role played by investments in ICT, software and professional training, that are particularly important to represent innovation in the service sectors. But the sectorial and “out-of-equilibrium” approaches that are used in NEMESIS, do not ensure that the long-run behavior of the model will conform to the general equilibrium prerequisite present in QUEST III. For QUEST III, in contrast, this time the compromise is at the cost of the richness and the level of detail of the innovation mechanisms of the model, that are restricted by the forward-looking expectations, and the high theoretical constraints, that the DSGE modeling imposes. For RHOMOLO, on the contrary, the limitations come more often from the data constraints and the difficulty in representing certain phenomena, such as knowledge externalities, on a detailed regional level. If, to these differences in the structure of the models, we add the endogenous, versus, semi-endogenous representation of growth they support, we could certainly not expect that they would provide similar results when evaluating EU R&I policies, but at least that their results would usefully complement each other’s. There are various ways and means, for the macroeconomic evaluation of EU R&I policies, and this thesis is dedicated to the presentation of this “compromise” the different models form, using the analysis of the main findings in the empirical and theoretical works developed since the fifties, to measure and represent economic growth.
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Pierre Le Mouël. Macroeconomic evaluation of EU R&I Policies : ways and Means. Economics and Finance. Université Côte d'Azur, 2019. English. ⟨NNT : 2019AZUR0008⟩. ⟨tel-02497667⟩

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