Developing Eastern Germany: The Effects of Economics Promotion in the Eastern German States after Reunification

Kölling Arnd ()
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Kölling Arnd: HWR Berlin School of Economics and Law, Alt-Friedrichsfelde 60, 10315 Berlin, Germany

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2016, vol. 236, issue 2, 275-295

Abstract: This study investigates the impact of public funding on the performance of establishments in Eastern Germany. Using data from the German Institute for Employment Research (IAB) Establishment Panel from 1996 through 2012, the effect of economic promotion in the eastern part of Germany is studied on a number of indicators that provide insight into the topic. For this purpose, conditional difference-in-differences estimators were derived using a propensity score matching approach. Treated establishments in the area of the former German Democratic Republic (GDR) invested more, had a higher value added and requested more labour than untreated firms when the amount of public funding is considered. However, on average, establishments with a history of previous investments also receive more funding than establishments that do not receive promotion. Also, some of the results are not permanent, such as the share of investment. Other effects of economic promotion in Germany include increases in wages, but these effects are rather small when compared to the size of the economic promotion. In addition, outcome for firms’ productivity is always insignificant and close to zero.

Keywords: Eastern Germany; subsidies; evaluation; labour demand (search for similar items in EconPapers)
JEL-codes: D04 D22 H25 J24 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:236:y:2016:i:1:p:242-275

DOI: 10.1515/jbnst-2015-1009

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