The Economic Effects of the EU Budget: A VAR Analysis

36 Pages Posted: 16 Oct 2008

See all articles by Pierfederico Asdrubali

Pierfederico Asdrubali

Government of the Italian Republic (Italy); John Cabot University

Soyoung Kim

affiliation not provided to SSRN

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.

Suggested Citation

Asdrubali, Pierfederico and Kim, Soyoung, The Economic Effects of the EU Budget: A VAR Analysis. JCMS: Journal of Common Market Studies, Vol. 46, Issue 5, pp. 933-968, December 2008. Available at SSRN: https://ssrn.com/abstract=1281712 or http://dx.doi.org/10.1111/j.1468-5965.2008.00825.x

Pierfederico Asdrubali (Contact Author)

Government of the Italian Republic (Italy) ( email )

Italy

John Cabot University ( email )

Via della Lungara 233
Rome, 00165
Italy

Soyoung Kim

affiliation not provided to SSRN ( email )

No Address Available

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