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Depressing dependence? Transfers and economic growth in the German States, 1975-2005

Thushyanthan Baskaran (), Lars Feld () and Sarah Necker ()

No 17/01, Freiburg Discussion Papers on Constitutional Economics from Walter Eucken Institut e.V.

Abstract: Most countries pay substantial intergovernmental transfers to poor regions with the aim of achieving regional convergence. Consequently, transfers should have a positive effect on economic growth. However, it is equally possible that transfers perpetuate under-development. This paper studies empirically the effect of intergovernmental transfers on economic growth with a panel of West German states over the period 1975-2005. The findings suggest that transfers do not foster economic growth, presumably because the recipients use them to subsidize declining industries.

Keywords: intergovernmental transfers; economic growth; fiscal federalism (search for similar items in EconPapers)
JEL-codes: H70 H73 H77 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
Date: 2017
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Related works:
Journal Article: Depressing dependence? Transfers and economic growth in the German states, 1975–2005 (2017) Downloads
Working Paper: Depressing Dependence? Transfers and Economic Growth in the German States, 1975-2005 (2016) Downloads
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