From foresight to welfare practices. Report on econometric modelling

This report is comprised of two main sections – each taking a different, but complementary approach to assessing public social investment expenditure. In section 1 we consider small area techniques and utilise EU-SILC data to construct new indicators of compensatory and investment policies at regional level. We then explore whether these indicators either converge or diverge across EU Member States. Then, we go on to include these indicators in a Structural Vector AutoRegression, (SVAR) analysis. The aim is to investigate the casual relationships between labour market outcomes of the young and different types of spending. Because of degrees of freedom issues, this analysis is carried out using NUTS1 data2 cumulated to an EU wide level. In section 2 we present our analysis of the efficacy of public social investment expenditure in regions of the EU. Not only do we consider the impact of public spending allowing for regional difference, we also consider other outcomes, for example, Real GDP per capita. The calculation of impulse response functions allows us to determine the impact of small changes in public social investment expenditure, and tax, in key areas.