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Fiscal transfers and regional economic growth

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  • Dawid, H.
  • Harting, P.
  • Neugart, M.

Abstract

In the aftermath of the financial crisis, with periphery countries in the European Union falling even more behind the core countries economically, there have been quests for various kinds of fiscal policies in order to revert divergence. How these policies would unfold and perform comparatively is largely unknown. We analyze four such stylized policies in an agent-based macroeconomic model and study the economic mechanisms behind their relative success. Our main findings are that the core country sharing the debt burden of the periphery country has almost no effect on the growth dynamics of that region, fiscal transfers have a positive short- and long-run impact on per-capita consumption in the target region, and that technology-oriented firm subsidies have the strongest positive long-run impact on competitiveness of the periphery country at which they are targeted. The positive effect of the technology-oriented policy is reinforced if combined with household transfers.

Suggested Citation

  • Dawid, H. & Harting, P. & Neugart, M., 2024. "Fiscal transfers and regional economic growth," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 146302, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:146302
    DOI: 10.1111/roie.12317
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/146302/
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