Market Size and Spatial Growth - Evidence from Germany’s Post-War Population Expulsions

Michael Peters

No 29329, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Virtually all theories of economic growth predict a positive relationship between population size and productivity. In this paper I study a particular historical episode to provide direct evidence for the empirical relevance of such scale effects. In the aftermath of the Second World War about 8m ethnic Germans were expelled from their domiciles in Eastern Europe and transferred to West Germany. This inflow increased the German population by almost 20%. Using variation across counties I show that the settlement of refugees had a large and persistent effect on the size of the local population, manufacturing employment and income per capita. I show that these findings are quantitatively consistent with an idea-based model of spatial growth if population mobility is subject to frictions and productivity spillovers occur locally. The model implies that the refugee settlement increased aggregate income per capita by about 12% after 25 years and that the historical settlement rule triggered persistent industrialization of rural areas.

JEL-codes: O11 O4 R11 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-dem, nep-geo, nep-gro, nep-his, nep-mig and nep-ure
Note: DEV EFG ITI
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