Combining Computable General Equilibrium Model with Microdata to Assess Poverty and Income Distribution Effects of Cohesion Policy

Poverty and inequality are among the most relevant societal issues in Romania, being at the centre of macro and microeconomic policies for over three decades. Improvements have been made, yet the problem persists and deepens for some categories of population. The cohesion policy implemented through the ESI funds targeted poverty directly through specific interventions, but also indirectly (through employment, education, competitiveness policies). Our study investigates the feasibility of combining a general equilibrium model with micro evaluation tools to capture the effects of a complex mix of macroeconomic policies on poverty and income distribution. This is a pioneering attempt for Romania, and besides certain limitations, such an approach proves to be a powerful instrument for exploring at micro level the impact of macro interventions. Our findings show that the cohesion policy was effective for poverty reduction, and the estimated effects are closely correlated with the amount of financing, the timeline, and the synchronisation of different interventions.