1. GRINCOH Meeting 22nd / 23rd November IWH in Halle/Saale The MASST2 Model Roberta Capello, Andrea Caragliu, Ugo Fratesi GRINCOH Growth – Innovation – Competitiveness: Fostering Cohesion in CEE

2. 2 Summary 1.The MASST2 model 2.Structure of the MASST2 model 3.An example of a MASST2 output 4.Structural changes to be introduced in the MASST3 version 5.Future steps Capello, Caragliu, Fratesi

3. 3 Summary 1.The MASST2 model 2.Structure of the MASST2 model 3.An example of a MASST2 output 4.Structural changes to be introduced in the MASST3 version 5.Future steps Capello, Caragliu, Fratesi

4. The MASST2 model (1) Macroeconomic – Sectoral – Social – Territorial –Model MASST1 published in: -Capello (2007). “A forecasting territorial model of regional growth: the MASST Model”, The Annals of Regional Science, 41 (4): 753-787. Capello, Camagni, Chizzolini, Fratesi (2008). “Modelling regional scenarios for the enlarged Europe: European competitiveness and global strategies”, Berlin (DE): Springer- Verlag. MASST2 published in: Capello and Fratesi (2012). “Modelling regional growth: an advanced MASST model”, Spatial Economic Analysis, 7 (3): 293-318. Capello, Fratesi, Resmini. Globalization and Regional Growth in Europe, Berlin: Springer Verlag. 4 Capello, Caragliu, Fratesi

5. The MASST2 model (2) Objectives Not to produce forecasts, but to produce scenarios for all European regions in 15-20 years (Previous drafts: Espon 3.2 - DGRegio) All NUTS2 regions of all 27 EU countries (270 regions) Partial equilibrium model 5 Capello, Caragliu, Fratesi

6. The MASST2 model (3) Characteristics of the model Econometric model Top-down & bottom-up (i.e. distributive and generative) at the same time  regional competition and cooperation Quantitative foresight 6 Capello, Caragliu, Fratesi

7. The MASST2 model (4) Demand and supply sides in MASST 7 National levelRegional level Supply-side aspects National competitiveness: FDI, unit labour costs Territorial capital Demand-side aspects Aggregate demand (internal and external) Sectoral Mix Capello, Caragliu, Fratesi Main drivers of the model Also matched by supply and demand elements

8. 8 Summary 1.The MASST2 model 2.Structure of the MASST2 model 3.An example of a MASST2 output 4.Structural changes to be introduced in the MASST3 version 5.Future steps Capello, Caragliu, Fratesi

9. Structure of the MASST2 model (1) 9 Capello, Caragliu, Fratesi

10. Structure of the MASST2 model (2) Regional growth is the sum of the two (regional and national) components: National growth as the sum of national accounts components (pseudo-identity) 10 Capello, Caragliu, Fratesi

11. Structure of the MASST2 model (3) National components 11

12. Structure of the MASST2 model (4) Regional and sectoral components Regional differential shift as the sum of various components (intra- sectoral and inter-sectoral) Industrial and tertiary employments are the result of intra-sectoral productivity and evolution 12 Capello, Caragliu, Fratesi

13. Structure of the MASST2 model (4) MIX effects are added in the simulation phase through a decomposition 13

14. Structure of the MASST2 model (5) Exogenous variables in the regional model Trust Energy costs Regional FDIs Sectoral diversity Accessibility High-level professions Structural funds R&D expenditure 14 Capello, Caragliu, Fratesi

15. 15 Summary 1.The MASST2 model 2.Structure of the MASST2 model 3.An example of a MASST2 output 4.Structural changes to be introduced in the MASST3 version 5.Future steps Capello, Caragliu, Fratesi

16. An example of a MASST2 output (1) 16 Average annual 2005-2020 growth rates of: GDPManufacturing employmentService employment Baseline scenario EU 272.040.11 Old 152.03-1.130.01 New 122.26-0.580.68 Scenario A EU 272.881.48 Old 152.87-1.131.38 New 123.07-0.572.07 Difference between scenario A and baseline EU 270.840.011.37 Old 150.840.001.37 New 120.810.011.38 Scenario B EU 271.29-1.15-0.06 Old 151.28-1.26-0.13 New 121.40-0.770.37 Difference between scenario B and baseline EU 27-0.75-0.14-0.17 Old 15-0.75-0.13-0.14 New 12-0.86-0.19-0.31 Example of aggregate results from the SPAN-3 version Capello, Caragliu, Fratesi

17. An example of a MASST2 output (2) 17 Capello, Caragliu, Fratesi

18. 18 Summary 1.The MASST2 model 2.Structure of the MASST2 model 3.An example of a MASST2 output 4.Structural changes to be introduced in the MASST3 version 5.Future steps Capello, Caragliu, Fratesi

19. Structural changes to be introduced in the MASST3 version (1) In the new generation of the MASST model, a set of relevant improvements shall be introduced, with the aim to improve the model, and account for relevant issues previously left outside its scope. In particular, we aim at endogeneizing: Public expenditure growth rate; Urban performance (population) Innovation. Besides, the MASST3 model will also model the current crisis’ effects on regional growth. 19 Capello, Caragliu, Fratesi

20. Structural changes to be introduced in the MASST3 version (2) 20 Capello, Caragliu, Fratesi a. The need for endogenizing public expenditure

21. Structural changes to be introduced in the MASST3 version (3) 21 Capello, Caragliu, Fratesi b. The need for endogenizing innovation ESPON KIT Project Average 2002-2004 share of product innovation

22. Structural changes to be introduced in the MASST3 version (3) 22 Capello, Caragliu, Fratesi c. The need for endogenizing the urban structure

23. 23 Summary 1.The MASST2 model 2.Structure of the MASST2 model 3.An example of a MASST2 output 4.Structural changes to be introduced in the MASST3 version 5.Future steps Capello, Caragliu, Fratesi

24. 24 Future steps At the next GRINCOH meeting a first version of the MASST3 model will be presented. MASST3 will be at the basis of WP9. Capello, Caragliu, Fratesi

25. And, for your attention, 25 Capello, Caragliu, Fratesi