Abstract We present a stylized, supply-side model to estimate the permanent effects of the Community Support Framework (CSF) programmes on a regional economy and use it to estimate the impact of the 1994–1999 and 2000–2006 CSF programmes on the Spanish region of Galicia. The evolution of the economy is simulated under two scenarios, with and without CSF funds, studying the contribution of the European regional policy to the output, employment and different categories of capital. Our results suggest that the contribution of the Structural Funds to the growth of the Galician economy is remarkable and that the impacts of the European programmes extend well beyond the end of the aid. Acknowledgements This article has partially been finished while Jesus López-Rodríguez was a Visiting Scholar in the Department of Economics at Harvard University. The authors want to thank comments made by two anonymous referees that substantially improve the quality of the article. The authors wants to thank Pol Antras, Elizabeth Kline, the Real Colegio Complutense at Harvard University and the research grant given by the Spanish Minister of Education and Science (reference PR2007-0347) to carry out this research. They also gratefully acknowledge the financial support from the Regional Government of Galicia—Xunta de Galicia—from the “Programa de Promoción Xeral da Investigacion” (Project Reference: PGIDIT 05 PXIB10001PR). A version of this work has been previously published as a working paper, DT FUNCAS 224/2005 in the Colección de Documentos de Trabajo de la Fundación de las Cajas de Ahorros (FUNCAS). The usual disclaimer applies. Notes See also report of the European Commission Citation(2007). An extensive analysis of the European spatial structure can be seen in Faíña and López-Rodríguez Citation(2006). Data on employment by sector and R&D figures are taken from the Fourth Report on Economic and Social Cohesion, Brussels, 2007. GDPpc figures are in purchasing power standards (pps) and have been deflated using the harmonized consumption price index to compute the growth rates of GDPpc. Germany on the contrary is the country most affected by the statistical effect.