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Does regional redistribution spur growth?

  • Koetter, Michael
  • Wedow, Michael

After the German reunification, interregional subsidies accounted for approximately four percent of gross fixed capital investment in the new federal states. We show that between 1992 and 2005 infrastructure and (small) business aid had a negative net impact on regional economic growth. This suggests that regional redistribution was ineffective, potentially due to a lack of spatial concentration to create growth poles.

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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2008,28.

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Date of creation: 2008
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Handle: RePEc:zbw:bubdp1:7567
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  1. Michael Funke & Annekatrin Niebuhr, 2005. "Threshold Effects and Regional Economic Growth-Evidence from West Germany," Quantitative Macroeconomics Working Papers 20501, Hamburg University, Department of Economics.
  2. Ravallion, Martin & Jalan, Jyotsna, 1996. "Growth divergence due to spatial externalities," Economics Letters, Elsevier, vol. 53(2), pages 227-232, November.
  3. Raghuram G. Rajan & Arvind Subramanian, 2008. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 643-665, November.
  4. Brakman, Steven & Garretsen, Harry & Marrewijk, Charles van, 2002. "Locational competition and agglomeration: the role of government spending," CCSO Working Papers 200209, University of Groningen, CCSO Centre for Economic Research.
  5. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  6. Michael C. Burda & Jennifer Hunt, 2001. "From Reunification to Economic Integration: Productivity and the Labor Market in Eastern Germany," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2), pages 1-92.
  7. Funke, Michael & Strulik, Holger, 1999. "Regional growth in West Germany: convergence or divergence?," Economic Modelling, Elsevier, vol. 16(4), pages 489-502, December.
  8. Steven Brakman & Harry Garretsen & Charles van Marrewijk, 2002. "Locational Competition and Agglomeration: The Role of Government Spending," CESifo Working Paper Series 775, CESifo Group Munich.
  9. Ron Martin & Peter Tyler, 2006. "Evaluating the impact of the structural funds on objective 1 regions: An exploratory discussion," Regional Studies, Taylor & Francis Journals, vol. 40(2), pages 201-210.
  10. Mora, Toni & Vaya, Esther & Surinach, Jordi, 2005. "Specialisation and growth: the detection of European regional convergence clubs," Economics Letters, Elsevier, vol. 86(2), pages 181-185, February.
  11. Reinhold Kosfeld & Hans-Friedrich Eckey & Christian Dreger, 2006. "Regional productivity and income convergence in the unified Germany, 1992-2000," Regional Studies, Taylor & Francis Journals, vol. 40(7), pages 755-767.
  12. Cain, Louis P., 1997. "Historical perspective on infrastructure and US economic development," Regional Science and Urban Economics, Elsevier, vol. 27(2), pages 117-138, April.
  13. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
  14. Demurger, Sylvie, 2001. "Infrastructure Development and Economic Growth: An Explanation for Regional Disparities in China?," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 95-117, March.
  15. Brakman, Steven & Garretsen, Harry & Marrewijk, Charles van, 2002. "Locational competition and agglomeration: the role of government spending," Research Report 02C75, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
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