Direct, spillover and welfare effects of regional firm subsidies

Sebastian Siegloch, Nils Wehrhöfer and Tobias Etzel

No 21-038, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We analyze the effects of a large place-based policy, subsidizing up to 50% of investment costs of manufacturing firms in East Germany after reunification. We show that a 1-percentage-point decrease in the subsidy rate leads to a 1% decrease in manufacturing employment. We document important spillovers for untreated sectors in treated counties, untreated counties connected via trade and local taxes, whereas we do not find spillovers on counties in the same local labor market. We show that the policy is at least as efficient as cash transfers to the unemployed, but is more effective in curbing regional inequality.

Keywords: place-based policies; employment; spillovers; administrative microdata (search for similar items in EconPapers)
JEL-codes: H24 J21 J23 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-eur, nep-geo, nep-lma and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/233872/1/1757136207.pdf (application/pdf)

Related works:
Working Paper: Direct, Spillover and Welfare Effects of Regional Firm Subsidies (2021)
Working Paper: Direct, Spillover and Welfare Effects of Regional Firm Subsidies (2021)
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:zbw:zewdip:21038

Access Statistics for this paper

More papers in ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().