RHOMOLO: A Dynamic Spatial General Equilibrium Model for Assessing the Impact of Cohesion Policy

TL;DR

RHOMOLO is a new dynamic spatial general equilibrium model designed to evaluate the effects of EU cohesion policy on regional development by integrating economic geography and dynamic factors.

Contribution

It introduces a novel, theoretically consistent model that combines spatial equilibrium, agent location choices, and dynamic accumulation of capital and technology.

Findings

Simulates policy scenarios affecting regional growth

Analyzes interplay of agglomeration and dispersion forces

Assesses impact of cohesion policy on EU regions

Abstract

The paper presents the newly developed dynamic spatial general equilibrium model of European Commission, RHOMOLO. The model incorporates several elements from economic geography in a novel and theoretically consistent way. It describes the location choice of different types of agents and captures the interplay between agglomeration and dispersion forces in determining the spatial equilibrium. The model is also dynamic as it allows for the accumulation of factors of production, human capital and technology. This makes RHOMOLO well suited for simulating policy scenario related to the EU cohesion policy and for the analysis of its impact on the regions and the Member States of the union.