The persistent effects of place-based policy: Evidence from the West-German Zonenrandgebiet

von Ehrlich, Maximilian; Seidel, Tobias (April 2015). The persistent effects of place-based policy: Evidence from the West-German Zonenrandgebiet (Discussion Papers 15-06). Bern: Department of Economics

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Using a natural experiment from Germany, we show that temporary placebased subsidies generate persistent effects on economic density. We identify employment and capital formation as main channels for higher income per square kilometer. As the spatial regression discontinuity design allows us to control for all spatially-continuous determinants of agglomeration (e.g. homemarket effects, knowledge spillovers), we attribute an important role to capital formation in explaining persistent spatial patterns of economic activity. However, estimates of externalities at the treatment border point to small net effects of the policy. We find strong evidence that pre-treatment land owners have
benefitted substantially from the program and transfers show larger effects in high-density places. Finally, accounting for regional subsidies raises the causal effect of market access for economic development as identified in Redding and Sturm (2008) by about 45 percent.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

v. Ehrlich, Maximilian and Seidel, Tobias

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

Discussion Papers

Publisher:

Department of Economics

Language:

English

Submitter:

Lars Tschannen

Date Deposited:

26 Feb 2021 14:44

Last Modified:

26 Feb 2021 14:44

JEL Classification:

H25, H41, H54, O15, O18, R12

BORIS DOI:

10.48350/145815

URI:

https://boris.unibe.ch/id/eprint/145815

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