Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278259 
Year of Publication: 
2022
Series/Report no.: 
ECONtribute Discussion Paper No. 210
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
Abstract: 
We analyze the effects of a large place-based policy, subsidizing up to 50% of the investment costs of manufacturing firms in East Germany. We show that a one-percentage-point decrease in the subsidy rate leads to a 1% decrease in manufacturing employment. We document important local spillovers for untreated construction and retail sectors, counties connected via trade, and local tax rates. There is no evidence for regional reallocation or changes in commuting and residential decisions. The cost per job amount to at most $23000. Last, we show that local subsidies are substantially more effective in curbing regional inequality than place-blind policies.
Subjects: 
place-based policies
employment
spillovers
administrative microdata
JEL: 
H24
J21
J23
Document Type: 
Working Paper

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