Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/126631
Authors: 
von Ehrlich, Maximilian
Seidel, Tobias
Year of Publication: 
2015
Series/Report no.: 
Discussion Papers, Universität Bern, Department of Economics 15-06
Abstract: 
Using a natural experiment from Germany, we show that temporary placebased subsidies generate persistent effects on economic density. We identify employment and capital formation as main channels for higher income per square kilometer. As the spatial regression discontinuity design allows us to control for all spatially-continuous determinants of agglomeration (e.g. homemarket effects, knowledge spillovers), we attribute an important role to capital formation in explaining persistent spatial patterns of economic activity. However, estimates of externalities at the treatment border point to small net effects of the policy. We find strong evidence that pre-treatment land owners have benefitted substantially from the program and transfers show larger effects in high-density places. Finally, accounting for regional subsidies raises the causal effect of market access for economic development as identified in Redding and Sturm (2008) by about 45 percent.
Subjects: 
Place-based policy
Regional policy
Economic geography
Persistence
Regression discontinuity
Locational advantage
Land value capitalization
JEL: 
H25
H41
H54
O15
O18
R12
Document Type: 
Working Paper

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