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The Economic Effects of the EU Budget: A VAR Analysis *
Author(s) -
ASDRUBALI PIERFEDERICO,
KIM SOYOUNG
Publication year - 2008
Publication title -
jcms: journal of common market studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.54
H-Index - 90
eISSN - 1468-5965
pISSN - 0021-9886
DOI - 10.1111/j.1468-5965.2008.00825.x
Subject(s) - stylized fact , economics , redistribution (election) , econometrics , macroeconomics , politics , political science , law
This article analyses the allocation, redistribution and stabilization role of the EU budget from 1976 to 2001. We use impulse responses from VAR models to infer the dynamic effect of a country's GNP on its disposable income – defined as GNP plus net EU budget transfers – both in the short run (stabilization) and in the long run (redistribution). In addition, we measure the allocation role of net budget transfers through their ‘dynamic multiplier’ effect on a country's GNP, circumventing the difficult task of estimating allocation via costs and benefits of trade flows. By disaggregating our data by sub‐period and by budget component, we discover how diverse the above effects can be in different decades, for different budget programmes and for different Member States. Finally, our framework allows us to establish some additional stylized facts that help derive relevant economic relations and useful policy conclusions.