More bucks, more growth, more justice? The effects of regional structural funds on regional economic growth and convergence in Germany

Jonathan Eberle and Thomas Brenner ()
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Jonathan Eberle: Philipps University Marburg, Deutschhausstr. 10, 35032 Marburg, Germany

No 2016-01, Working Papers on Innovation and Space from Philipps University Marburg, Department of Geography

Abstract: This paper analyzes the impact of the German structure program "Joint Task for the Improvement of Regional Economic Structure" (GRW) on regional economic growth. The paper extends the existing literature by several aspects. First of all, using the popular augmented Solow model by Mankiw et al. (1992) as starting point, we develop an enhanced growth model by including employment as well as technological spatial spillovers to the model. Secondly, the program has not been analyzed within a dynamic spatial panel framework on the level of the 402 German small scale regions before. We used a detailed dataset on this regional level and adress the problem of endogeneity by using a System Generalized Method of Moments (GMM) estimator. Finally, we investigate the impact of regional conditions on the effects of the GRW program. The result illustrates that the impact of public subsidies is overestimated in the current literature. In fact, the infrastructure program even emanates a negativ direct impact on regional economic growth, especially in sparely populated regions as well as in non-innovative regions.

Keywords: Regional economic growth; ß-convergence; Structural funds; Spatial panel econometrics; Generalized Methods of Moments (GMM) Estimation (search for similar items in EconPapers)
JEL-codes: C23 O47 R11 R48 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2016-03-18
New Economics Papers: this item is included in nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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