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Transfers, agglomeration and German unification

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  • Ross, Matthias

Abstract

This paper analyses in the framework of a 2-region economic geography model the impact of transfers on agglomeration of economic activity. Two main results can be derived: First, subsidies to the activity of firms are more efficient to avoid agglomeration than subsidies to consumers (social policy). Second, if a less developed region starts its catch up process first increasing and afterwards decreasing transfers are necessary to avoid agglomeration. Due to these results east Germany's slowdown of convergence may be a consequence of too less transfers and especially too less firm subsidies. Furthermore, if east Germany locates still at the first stage of convergence even increasing transfers would be necessary to guarantee convergence.

Suggested Citation

  • Ross, Matthias, 2001. "Transfers, agglomeration and German unification," HWWA Discussion Papers 144, Hamburg Institute of International Economics (HWWA).
  • Handle: RePEc:zbw:hwwadp:26161
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    File URL: https://www.econstor.eu/bitstream/10419/19407/1/144.pdf
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    References listed on IDEAS

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    1. Fredrik Andersson & Rikard Forslid, 2003. "Tax Competition and Economic Geography," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 279-303, April.
    2. Hans‐Werner Sinn, 2002. "Germany’s Economic Unification: An Assessment after Ten Years," Review of International Economics, Wiley Blackwell, vol. 10(1), pages 113-128, February.
    3. Gianmarco I.P. Ottaviano, 2000. "Ad usum delphini: A Primer in "New Economy Geography"," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 59(1), pages 89-116, April.
    4. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9781107001411.
    5. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    6. Baldwin, Richard E. & Krugman, Paul, 2004. "Agglomeration, integration and tax harmonisation," European Economic Review, Elsevier, vol. 48(1), pages 1-23, February.
    7. Danny Quah, 1997. "Regional Convergence from Local Isolated Actions: II Conditioning," CEP Discussion Papers dp0379, Centre for Economic Performance, LSE.
    8. Martin, Philippe, 1999. "Public policies, regional inequalities and growth," Journal of Public Economics, Elsevier, vol. 73(1), pages 85-105, July.
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    Cited by:

    1. Cristobal, Adolfo, 2007. "Trade and migration: a U-shaped transition in Eastern Europe," MPRA Paper 3446, University Library of Munich, Germany.

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    More about this item

    Keywords

    economic geography; economic integration; transfers; tax policy; east Germany;
    All these keywords.

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • F02 - International Economics - - General - - - International Economic Order and Integration

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