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Public Sector Centralization and Productivity Growth: Reviewing the German Experience

  • Stegarescu, Dan
  • Büttner, Thiess
  • Behnisch, Alexej

The paper examines the role of the vertical structure of the public sector for economic growth in Germany in a long?term perspective. A theoretical model shows that, due to spillover effects of public service provision across lower level governments, federal government activities could have substantially contributed to productivity growth. A review of the German experience starting in the last quarter of the 19th century shows that the overall development is consistent with a stimulating role of the federal government in general and in specific areas like, for instance, transport and communication. However, a further empirical analysis of the period after World War II raises doubts about the efficiency of the vertical structure of the public sector with regard to productivity growth, since the results indicate that a smaller budget share of the state level would have benefited growth.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 02-03.

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Date of creation: 2002
Date of revision:
Handle: RePEc:zbw:zewdip:894
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  1. Shantayanan Devarajan & Vinaya Swaroop & Heng-fu Zou, 1996. "The composition of public expenditure and economic growth," CEMA Working Papers 77, China Economics and Management Academy, Central University of Finance and Economics.
  2. Danyang Xie & Heng-fu Zou & Hamid Davoodi, 1999. "Fiscal Decentralization and Economic Growth in the United States," CEMA Working Papers 109, China Economics and Management Academy, Central University of Finance and Economics.
  3. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  4. Robert M. Solow, 1994. "Perspectives on Growth Theory," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 45-54, Winter.
  5. Robert J. Barro, 1998. "Notes on Growth Accounting," NBER Working Papers 6654, National Bureau of Economic Research, Inc.
  6. Davoodi, Hamid & Zou, Heng-fu, 1998. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," Journal of Urban Economics, Elsevier, vol. 43(2), pages 244-257, March.
  7. repec:cup:cbooks:9780521027922 is not listed on IDEAS
  8. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
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