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Growth effects of regional policy in Germany: results from a spatially augmented multiplicative interaction model

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  • Björn Alecke

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  • Timo Mitze

    ()

  • Gerhard Untiedt

    ()

Abstract

Private investment subsidies are a key instrument for regional policy making to foster the economic development in lagging regions. In this paper, we analyze their effect on labor productivity growth for German labor market regions for the period from 1994 to 2006. A spatially augmented multiplicative interaction model based on neoclassical growth theory is used, which allows us to assess the marginal effect of regional policy proxied by overall payments of the main German regional development program on the region’s convergence speed conditional on its initial income position as well as policy-related spillovers from its spatial neighborhood. Our results show a statistically significant positive effect of regional policy on labor productivity growth, which increases, the further away the supported region is from its steady-state income level, and the more grants are provided to its geographical neighborhood. The latter effect highlights the existence of positive spatial spillover effects from regional policy in Germany, which enhance the attractiveness of the whole macro region for private sector investments. The additional growth stimulus provided by a 1 % increase in the region’s funding volume is thereby related to an up to 0.3 % gain in terms of labor productivity growth. For regions with the highest initial gaps to steady-state income in the sample distribution, the regional policy stimulus accounts for almost 8 % of the regions’ productivity growth performance. Copyright Springer-Verlag 2013

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  • Björn Alecke & Timo Mitze & Gerhard Untiedt, 2013. "Growth effects of regional policy in Germany: results from a spatially augmented multiplicative interaction model," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(2), pages 535-554, April.
  • Handle: RePEc:spr:anresc:v:50:y:2013:i:2:p:535-554
    DOI: 10.1007/s00168-012-0503-7
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    Cited by:

    1. Amitrajeet A. Batabyal & Peter Nijkamp, 2019. "The magnification of a lagging region’s initial economic disadvantages on the balanced growth path," Asia-Pacific Journal of Regional Science, Springer, vol. 3(3), pages 719-730, October.
    2. Thomas Brenner & Franziska Pudelko, 2019. "The effects of public research and subsidies on regional structural strength," Journal of Evolutionary Economics, Springer, vol. 29(5), pages 1433-1458, November.
    3. Eva Dettmann & Matthias Brachert & Lutz Schneider & Mirko Titze, 2021. "Die Wirkung von GRW-Investitionszuschüssen — ein Beitrag zum Aufholprozess? [Did GRW Investment Grants Contribute to the Catching-up of East Germany?]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 101(1), pages 26-31, March.
    4. Brachert, Matthias & Brautzsch, Hans-Ulrich & Dettmann, Eva & Giebler, Alexander & Schneider, Lutz & Titze, Mirko, 2020. ""Evaluation der Gemeinschaftsaufgabe 'Verbesserung der regionalen Wirtschaftsstruktur' (GRW)" durch einzelbetriebliche Erfolgskontrolle: Endbericht," IWH Online 5/2020, Halle Institute for Economic Research (IWH).
    5. Corinna Kleinert & Alexander Vosseler & Uwe Blien, 2018. "Classifying vocational training markets," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(1), pages 31-48, July.
    6. Schwengler, Barbara, 2013. "Einfluss der europäischen Regionalpolitik auf die deutsche Regionalförderung," IAB Discussion Paper 201318, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    7. Dettmann, Eva & Titze, Mirko & Weyh, Antje, 2017. "Who benefits from GRW? Heterogeneous employment effects of investment subsidies in Saxony Anhalt," IWH Discussion Papers 27/2017, Halle Institute for Economic Research (IWH).
    8. Steffen Maretzke & Joachim Ragnitz & Gerhard Untiedt, 2019. "Betrachtung und Analyse von Regionalindikatoren zur Vorbereitung des GRW-Fördergebietes ab 2021 (Raumbeobachtung)," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 83, October.

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    More about this item

    Keywords

    C21; R12; R58;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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