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Subsidization and Structural Change in Eastern German Transition: Did Economic Policy Meet Its Objectives?

  • Katja Gerling
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    Economic policy interventions of a scale as effected in eastern Germany can be expected to have a significant impact on the economy, which may be in accordance with the objectives of the policy measures or manifest itself in distortions of several kinds. This paper analyzes the structural effects of investment subsidization as one of the core policy instruments by means of an error-correction model of factor demand and output. It intends to find out whether investment subsidization contributes to creating competitive economic structures, employment and growth or whether it just fosters an exaggerated capital intensity.

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    File URL: https://www.ifw-members.ifw-kiel.de/publications/subsidization-and-structural-change-in-eastern-german-transition-did-economic-policy-meet-its-objectives/kap998.pdf
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    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 998.

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    Length: 96 pages
    Date of creation: Aug 2000
    Date of revision:
    Handle: RePEc:kie:kieliw:998
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    1. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I.
    2. Gerling, Katja, 1998. "Transfers and transition: The impact of government support on factor demand and production in Eastern Germany," Kiel Working Papers 878, Kiel Institute for the World Economy.
    3. FitzRoy, Felix & Funke, Michael, 1995. "Capital-Skill Complementarity in West German Manufacturing," Empirical Economics, Springer, vol. 20(4), pages 651-65.
    4. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-94, September.
    5. Schiantarelli, Fabio, 1983. "Investment Models and Expectations: Some Estimates for the Italian Industrial Sector," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(2), pages 291-312, June.
    6. Banerjee, Anindya, 1999. " Panel Data Unit Roots and Cointegration: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 607-29, Special I.
    7. Sinn, Gerlinde & Sinn, Hans-Werner, 1992. "Kaltstart. Volkswirtschaftliche Aspekte der Deutschen Vereinigung," Monograph, Mohr Siebeck, Tübingen, edition 2, number urn:isbn:9783161459429, May.
    8. Suzanne McCoskey & Chihwa Kao, 1999. "A Monte Carlo Comparison of Tests for Cointegration in Panel Data," Center for Policy Research Working Papers 3, Center for Policy Research, Maxwell School, Syracuse University.
    9. King, M. A., 1972. "Taxation and investment incentives in a vintage investment model," Journal of Public Economics, Elsevier, vol. 1(1), pages 121-147, April.
    10. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
    11. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    12. Gerling, Katja & Schmidt,Klaus-Dieter, 1997. "On the competitive position of Eastern German manufacturing: Why is catching-up so slow?," Kiel Working Papers 825, Kiel Institute for the World Economy.
    13. Jeroen J.M. Kremers & Neil R. Ericsson & Juan J. Dolado, 1992. "The power of cointegration tests," International Finance Discussion Papers 431, Board of Governors of the Federal Reserve System (U.S.).
    14. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
    15. Klodt, Henning & Boss, Alfred, 1994. "Standort Deutschland : strukturelle Herausforderungen im neuen Europa," Open Access Publications from Kiel Institute for the World Economy 822, Kiel Institute for the World Economy (IfW).
    16. Markus Diehl, 1999. "The Impact of International Outsourcing on the Skill Structure of Employment: Empirical Evidence from German Manufacturing Industries," Kiel Working Papers 946, Kiel Institute for the World Economy.
    17. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
    18. Lammers, Konrad & Thoroe, Carsten, 1982. "Sachkapitalförderung oder Humankapitalförderung in der regionalen Wirtschaftspolitik," Kiel Working Papers 156, Kiel Institute for the World Economy.
    19. Faini, Riccardo & Schiantarelli, Fabio, 1985. "Oligopolistic models of investment and employment decisions in a regional context: Theory and empirical evidence from a putty-clay model," European Economic Review, Elsevier, vol. 27(2), pages 221-242, March.
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