Mid-Term Evaluation of NDP/CSF:Mid-Term Evaluation of NDP/CSF:Macro and Micro EvaluationMacro and Micro Evaluation

The Economic and Social Research InstituteThe Economic and Social Research Institute

www.esri.iewww.esri.ie

IntroductionIntroduction

Medium-Term ProspectsMedium-Term Prospects Micro-economic studiesMicro-economic studies Macro-economic frameworkMacro-economic framework

• ImplicationsImplications Horizontal PrinciplesHorizontal Principles Supplementary MeasuresSupplementary Measures Evaluation ProcessEvaluation Process

Macro-Economic BackgroundMacro-Economic Background

Potential Growth RatePotential Growth Rate• Infrastructural DeficitInfrastructural Deficit

InflationInflation• Modelling Housing MarketModelling Housing Market

Changing Sectoral StructureChanging Sectoral Structure Strategy Broadly CorrectStrategy Broadly Correct

Microeconomics:InfrastructureMicroeconomics:Infrastructure

International experienceInternational experience Model Impact of roadsModel Impact of roads Model Impact of sanitary servicesModel Impact of sanitary services Returns to roadsReturns to roads

• Low in 1980sLow in 1980s• Very high 2000Very high 2000

Impacts on productivityImpacts on productivity

Microeconomics: Human CapitalMicroeconomics: Human Capital

Throughput of schemesThroughput of schemes Transforms from low to high skilledTransforms from low to high skilled

• Reduces supply of low skilledReduces supply of low skilled• Increases supply of skilledIncreases supply of skilled

Participation effectParticipation effect Competitiveness effectCompetitiveness effect Productivity effectProductivity effect

Skilled Labour SupplySkilled Labour Supply

WW

LL

WW11

DD11LL

SS11LL

LL11

SS22LL

LL22

DD22LL

Unskilled LabourUnskilled Labour

SS11LL

SS22LL

UU

LL22

DDLL

LL11

S=WS=W

LL

WW

DD22LL

WW22

Returns to EducationReturns to Education

% premium on primary education only

0%

20%

40%

60%

80%

100%

Junior Leaving Diploma University

198719942000

ImplicationsImplications

Returns on InvestmentReturns on Investment• High at this point in time, c. 14% High at this point in time, c. 14% • Constraint on action – inflationConstraint on action – inflation

Model of Housing marketModel of Housing market• Inflationary consequences of investmentInflationary consequences of investment

Medium-term sectoral prospectsMedium-term sectoral prospects• Good – services, also high tech.Good – services, also high tech.• Poor – agriculture, fishing, tourism, Poor – agriculture, fishing, tourism,

buildingbuilding

NDP Effects on GNPNDP Effects on GNP

0

1

2

3

4

5

6

7

8

2000

2002

2004

2006

2008

2010

%

Demand Only Total

Investment CriteriaInvestment Criteria

Rely on Evaluations of OPsRely on Evaluations of OPs Market Failure?Market Failure? Priority and TimingPriority and Timing

• InflationInflation Management of InfrastructureManagement of Infrastructure

• Getting the “best” out of itGetting the “best” out of it Competition – reveals informationCompetition – reveals information The MenuThe Menu

• Economists and spending moneyEconomists and spending money

““Envelope” to 2006Envelope” to 2006

Existing Huge EffortExisting Huge Effort• Overall Unchanged “volume” to 2006Overall Unchanged “volume” to 2006

High PriorityHigh Priority• Economic and Social InfrastructureEconomic and Social Infrastructure

Regional – Special Funding for NSSRegional – Special Funding for NSS Human ResourcesHuman Resources

• broadly unchanged prioritybroadly unchanged priority Productive SectorProductive Sector

• Reduced PriorityReduced Priority

Investment, share of GDP Investment, share of GDP 20012001

15

20

25

30

%

Public Investment, % of GDPPublic Investment, % of GDP

0 1 2 3 4 5 6

Belgium

Germany

Denmark

Spain

Finland

France

Ireland 2002

United Kingdom

Netherlands

Poland

Portugal

ExamplesExamples

Social housingSocial housing• Constrained by inflationConstrained by inflation

Sectoral ProspetcsSectoral Prospetcs• Agriculture, Fishing, Tourism, BuildingAgriculture, Fishing, Tourism, Building• Affects training, R&DAffects training, R&D

Education and healthEducation and health

Example - BroadbandExample - Broadband

Where is the market failure?Where is the market failure? Regulatory FailureRegulatory Failure Possible Regional IssuesPossible Regional Issues Taking the horse to waterTaking the horse to water

Horizontal IssuesHorizontal Issues

Horizontal PrinciplesHorizontal Principles• Social inclusion, environment, equality, Social inclusion, environment, equality,

rural development, regional balance, rural development, regional balance, North-SouthNorth-South

Proofing? Purpose :Proofing? Purpose :• Sensitising policy makersSensitising policy makers• Policy EvaluationPolicy Evaluation

Better:Better:• Targeted policy impact assessmentTargeted policy impact assessment

Supplementary MeasuresSupplementary Measures

Appropriate PricingAppropriate Pricing• WaterWater• WasteWaste• TollingTolling

Management of Housing MarketManagement of Housing Market PlanningPlanning PPPsPPPs

Management IssuesManagement Issues

ManagementManagement• under resourcedunder resourced

Project SelectionProject Selection• No change without evaluationNo change without evaluation

Evaluation ProcessEvaluation Process

Terms of referenceTerms of reference• All human life is thereAll human life is there

Length of reports v readabilityLength of reports v readability• Best the enemy of the goodBest the enemy of the good

Do more in house – less reliance on Do more in house – less reliance on consultantsconsultants

Importance of independenceImportance of independence

Priorities & LessonsPriorities & Lessons

RoadsRoads Urban Public TransportUrban Public Transport

Management of InfrastructureManagement of Infrastructure• Maximise UsageMaximise Usage

Appropriate pricingAppropriate pricing No change without evaluationNo change without evaluation