A CGE approach to measuring the impacts of EU structural funds in a small open economy

The present paper analyses the impact of the EU funds, for the European region of A zores, as they affect GDP , employment, and the wellbeing of families in different income levels, using a dynamic, multi‐sector, computable general equilibrium model ( CGE ) – A zor M od. Simulating the impact of a total cut in transfers and comparing with a base business as usual scenario, it is concluded that the elimination of the EU transfers could cause a sharp permanent fall on public demand and an immediate 2 per cent fall in GDP . The fall in public demand causes a fall in consumer and investment prices which will foster a sharp increase in investment demand that gradually causes GDP to grow back to its initial levels within a ten year period.