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The Economic Effects of the EU Budget: A VAR Analysis

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  • PIERFEDERICO ASDRUBALI
  • SOYOUNG KIM

Abstract

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. Copyright (c) 2008 The Author(s). Journal compilation (c) 2008 Blackwell Publishing Ltd.

Suggested Citation

  • Pierfederico Asdrubali & Soyoung Kim, 2008. "The Economic Effects of the EU Budget: A VAR Analysis," Journal of Common Market Studies, Wiley Blackwell, vol. 46, pages 933-968, December.
    • Handle: RePEc:bla:jcmkts:v:46:y:2008:i::p:933-968
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    3. Paolo Pasimeni & Stéphanie Riso, 2016. "The redistributive function of the EU budget," IMK Working Paper 174-2016, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

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