Absorptive capacity, economic freedom and the conditional effects of regional policy

Jonathan Eberle, Thomas Brenner () and Timo Mitze
Additional contact information
Jonathan Eberle: Department of Geography, Philipps University Marburg

No 2018-03, Working Papers on Innovation and Space from Philipps University Marburg, Department of Geography

Abstract: This paper analyzes the role played by regional conditioning factors, namely absorptive capacity and economic freedom, for the working of regional policy in Germany. We construct synthetic composite indicators to measure differences in these factors across German regions and stratify regions by their respective values. We then identify the subsample-specific transmission channels of regional policies in a spatial panel vector-autoregressive (VAR) framework and compare the direction and magnitude of effects by impulse-response function analysis and ex-post t-tests. The results point to two main channels of policy impact: While regions with low levels of absorptive capacity and economic freedom benefit from public funding only in terms of a traditional funding channel (i.e. higher investment rates and partly increased human capital levels), the link between regional policy, GDP and technology growth is very weak for these regions. In comparison, our findings hint at significant positive effects on regional GDP per workforce and patent activity for regions with a high absorptive capacity and economic freedom (i.e. a knowledge-based funding channel). This underlines the role of regional conditions for the direction and magnitude of funding effects and should be considered by policy makers as a means to trigger policy effectiveness in times of stagnating or decreasing funding volumes.

Keywords: regional policy; production function; absorptive capacity; economic freedom; SpPVAR; impulse-response functions (search for similar items in EconPapers)
JEL-codes: C33 O38 O47 R11 R58 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2018-10
New Economics Papers: this item is included in nep-cse, nep-eur, nep-geo, nep-ino, nep-sbm and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repec.geographie.uni-marburg.de/pum/wpaper/wp0318.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pum:wpaper:2018-03

Access Statistics for this paper

More papers in Working Papers on Innovation and Space from Philipps University Marburg, Department of Geography Deutschhausstrasse 10, 35032 Marburg. Contact information at EDIRC.
Bibliographic data for series maintained by Robert Csicsics ( this e-mail address is bad, please contact ).