Economic Impact Assessment of Entrepreneurship Policies with the GMR-Europe Model

Abstract

This chapter introduces the most recent version of the geographic macro and regional (GMR) Europe model. The model estimates the economic impacts of policies that aim at improving the quality of entrepreneurship ecosystems. As such, GMR-Europe is the first available economic impact assessment model that estimates the effects of entrepreneurship policies on several economic variables like productivity, GDP, employment, and wages. To measure the quality of regional entrepreneurial ecosystems, GMR-Europe integrates the Regional Entrepreneurship and Development Index (REDI) into its structure. In addition to introducing the GMR-Europe This study was financed by the Financial and Institutional Reforms for an Entrepreneurial Society (FIRES) that has received funding from the EU's Horizon 2020 research and innovation program under grant agreement No. 649378 and by the European Union and Hungary co-financed by the European Social Fund through the project EFOP-3.6.2-16-2017-00017, titled "Sustainable, intelligent and inclusive regional and city models". The research has been conducted as part of the National Excellence in Higher Education Program in Hungary (reference number of the contract: 20765-3/2018/FEKUTSTRAT). The authors of this chapter are indebted to the following colleagues for their invaluable assistance: Gallusz Abaligeti and Dániel Kehl, for their contribution to the empirical calibration of the TFP model equations, Anna Csajkás and Richárd Farkas for their assistance in data collection, data preparation and contribution to estimations and Péter Járosi, whose previous engagement in model development and continuous assistance through this work is an inevitable part of the present model setup. Laszlo Szerb and Attila Varga also gratefully acknowledge support from the National Scientific Research Fund of Hungary (OTKA/NKFI grant no. 120289 titled Entrepreneurship and Competitiveness investigations in Hungary based on the Global Entrepreneurship Monitor surveys 2017-2019). Thanks to Andrea Herrmann for comments on earlier drafts of this chapter.

A Reform Strategy for the UK

“…For calculating country scores of the Regional Entrepreneurship and Development Index (REDI), we used the population-weighted REDI-scores. Out of 24 European countries, the UK then ranks 4th with 56.0 points behind Ireland, Denmark, and Sweden (Table 3.3, Varga et al 2020). The REDI ranking for the UK is quite consistent with other more commonly used indicators.…”

Estimating the economic impacts of knowledge network and entrepreneurship development in smart specialization policy

“…The following section provides a more detailed account of how GMR-Europe is extended in order to estimate the impacts of entrepreneurship and knowledge network development policies. For the complete technical description of the latest version of the GMR-Europe model including the list of equations, estimation/calibration of parameters as well as data description, see Varga, Sebestyén, Szabó, and Szerb (2018).…”

“…This was followed by the GMR-Hungary model, which is currently used by the Hungarian government for Cohesion Policy impact analyses (Varga, 2007). GMR-Europe was established in the IAREG FP7 project (Varga, 2017) and further developed in the GRINCOH FP7 (Varga, Járosi, Sebestyén, & Szerb, 2015) and the FIRES H2020 project (Varga et al, 2018). Another version of GMR models is GMR-Turkey (Varga & Baypinar, 2016).…”

A Reform Strategy for Germany

“…For calculating an overall country score, we used the population weighted regional REDI-scores. Out of the 24 EU countries for which we have this regional data, Germany ranks seventh with 51.1 points between Finland and Austria, behind Ireland, the Scandinavian countries, The Netherlands, and the UK, but ahead of France and all the Southern and Central European countries (Table 3.3, Varga et al 2020). This implies that the German competitive position in the European Union is supported by its strong, regionally embedded Mittelstand and incremental innovation system (Audretsch and Lehmann 2016).…”

“…As the simulation exercises in Varga et al (2020) have shown, improving the scores on REDI in Germany would have positive effects on productivity and well-being in all regions, even if some would benefit more than others. At this point, however, it is not quite clear exactly how one could go about engineering such an improvement in the German entrepreneurial ecosystems.…”