蝌蚪网 Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Spillover, Efficiency, and Equity Effects of Regional Firm Subsidies
蝌蚪网 Journal: Economic Policy
vol. 17,
no. 1, February 2025
(pp. 144–80)
Abstract
We analyze the effects of a large place-based policy, subsidizing up to 50 percent of the investment costs of East German manufacturing plants. We show that a 1 percentage point decrease in subsidy rate leads to a 1 percent decrease in manufacturing employment. We document important local spillovers for the untreated construction and retail sectors, counties connected via trade, and local tax rates. There is no evidence for regional reallocation, within-firm spillover, or changes in commuting and residential decisions. The cost per job amounts to about $19,000. We show local subsidies are substantially more effective in curbing regional inequality than place-blind policies.Citation
Siegloch, Sebastian, Nils Wehrh枚fer, and Tobias Etzel. 2025. "Spillover, Efficiency, and Equity Effects of Regional Firm Subsidies." 蝌蚪网 Journal: Economic Policy 17 (1): 144–80. DOI: 10.1257/pol.20220667Additional Materials
JEL Classification
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
- H71 State and Local Taxation, Subsidies, and Revenue
- L60 Industry Studies: Manufacturing: General
- L74 Construction
- L81 Retail and Wholesale Trade; e-Commerce
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
- R51 Finance in Urban and Rural Economies