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Transfers, agglomeration and German unification

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  • Ross, Matthias
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    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. -- Im Rahmen eines 2-Regionen Modells der ?ökonomischen Geographie? wird der Einfluss von Transfers auf die Konzentration wirtschaftlicher Aktivität untersucht. Zwei entscheidende Ergebnisse ergeben sich aus dem theoretischen Modell: Erstens sind Transfers, die für die Subventionierung von Unternehmen verwendet werden, wirkungsvoller als sozialpolitisch motivierte Transfers. Zweitens kann der Anpassungsprozeß einer geringer entwickelten Region in zwei Phasen eingeteilt werden, wobei während der ersten Phase zunehmende und während der zweiten Phase abnehmende Transfers erforderlich sind, um Einkommenskonvergenz zu gewährleisten. Im Lichte dieser theoretischen Ergebnisse können in der Konstanz der Transfers in die neuen deutschen Bundesländer und in der gleichzeitigen Abnahme der Unternehmenssubventionen weitere Erklärungen der mangelnden Einkommenskonvergenz gesehen werden. Befinden sich die neuen Bundesländer noch in der ersten Phase des Anpassungsprozesses, dann wären sogar steigende Transfers notwendig, um Konvergenz zu garantieren.

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    Bibliographic Info

    Paper provided by Hamburg Institute of International Economics (HWWA) in its series HWWA Discussion Papers with number 144.

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    Date of creation: 2001
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    Handle: RePEc:zbw:hwwadp:26161

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    Web page: http://www.econstor.eu/handle/10419/20
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    Related research

    Keywords: economic geography; economic integration; transfers; tax policy; east Germany;

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    References

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    1. Baldwin, Richard & Krugman, Paul, 2000. "Agglomeration, Integration and Tax Harmonization," CEPR Discussion Papers 2630, C.E.P.R. Discussion Papers.
    2. Hans-Werner Sinn, 2000. "Germany's Economic Unification: An Assessment after Ten Years," NBER Working Papers 7586, National Bureau of Economic Research, Inc.
    3. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9780521171960.
    4. Martin, Philippe, 1998. "Public Policies, Regional Inequalities and Growth," CEPR Discussion Papers 1841, C.E.P.R. Discussion Papers.
    5. Ottaviano, G.I.P., 1999. "Ad Usum Delphini: a Primer in 'New Economic Geography'," Economics Working Papers eco99/28, European University Institute.
    6. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
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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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