By Jonathan Eberle and Philipp Boeing.
The Working Paper #03.19 “Effects of R&D subsidies on regional economic dynamics: Evidence from Chinese provinces” is now online and available here for reading and downloading. An overview of all Working Papers yet published in this blog is provided via the button “Working Papers” in the menu above.
We investigate the impact of research and development (R&D) subsidies on R&D inputs of large- and medium-sized firms and on additional innovation and economic activities in Chinese provinces. A panel vector autoregressive (VAR) model and corresponding impulse response function (IRF) analysis allow us to differentiate between direct and indirect effects, which add up to total effects. We find that an increase of R&D subsidies significantly decreases private R&D investments, although there is a significant positive effect on the R&D personnel employed in firms. We interpret these findings as a partial crowding-out effect because public funds substitute some private funds while total R&D inputs still increase. Complementarily, we find a positive secondary effect on the provincial patent activity, our measure of technological progress. Interestingly, we also find potentially unintended effects of R&D subsidies on increases in the investment rate in physical capital and residential buildings. Although R&D subsidies fail to incentivize private R&D expenditures, firms increase total R&D inputs, and provincial economies benefit from secondary effects on technological progress and capital deepening.
By Jonathan Eberle.
The Working Paper #01.19 “Regional fiscal equalization in Germany – A simultaneous equation approach to assess the economic effects of fiscal policy” is now online and available here for reading and downloading. An overview of all Working Papers yet published in this blog is provided via the button “Working Papers” in the menu above.
Regional fiscal equalization in Germany aims to reduce fiscal disparities by allocating financial resources to less promising regions in order to support the supply of public goods. This paper aims to analyse secondary economic effects of regional fiscal equalization on several economic in- and output variables. Additionally, the paper examines the potential regional characteristics to influence the transformation of fiscal inputs into economic outcomes. Lastly, I compare the effects of fiscal equalization to these of the major German structural funding program GRW. My findings reveal a significant positive effect of fiscal equalization on the regional employment rate. Moreover, the findings suggest different transmission channels of fiscal equalization in East and West Germany. Particularly, I find higher effects in right-wing CDU/CSU preferring regions on the employment, human capital and private-sector investment rate. Finally, while structural funding affects more economic variables significantly, the magnitude of the estimated economic responses of fiscal equalization compared to these of German structural funding are not statistically different.
By Jonathan Eberle, Thomas Brenner and Timo Mitze.
The Working Paper #01.18 “More publicly funded research, more knowledge spillovers, more economic growth? An empirical analysis for German regions” is now online and available here for reading and downloading. An overview of all Working Papers yet published in this blog is provided via the button “Working Papers” in the menu above.
This paper deals with the effects of publicly funded research on regional
technological progress and economic growth. We adopt a system approach and
investigate the effects on all regional input factors and output by means of a
flexible spatial panel VAR (SpPVAR) model. This allows us to deal with the
evolutionary nature of regional dynamic processes. We further extend the existing empirical literature on the role of publicly funded research for economic
development by differentiating between public research activities conducted by
universities, technical colleges (Fachhochschulen) and non-university research institutes. The empirical results show that an increase in (public) third-party funds to technical colleges leads to positive effects on regional investment and
employment rates as well as the human capital stock. We also find a
positive link between the publication rate of non-university research institutes and regional investment and employment rates. Furthermore, an overall increase in combined public third-party funding of universities and technical colleges affects regional patent activities, the employment rate and output positively.
By Jonathan Eberle and Thomas Brenner.
The Working Paper #01.16 “More bucks, more growth, more justice? The effects of regional structural funds on regional economic growth and convergence in Germany” is now online and available here for reading and downloading. An overview of all Working Papers yet published in this blog is provided via the button “Working Papers” in the menu above.
This paper analyzes the impact of the German structure program “Joint Task for
the Improvement of Regional Economic Structures” (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 use a detailed dataset on this regional level and address 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 results illustrate that the impact of public subsidies is overestimated in the
current literature. In fact, the infrastructure program even emanates a negative
direct impact on regional economic growth, especially in sparely populated regions as well as in non-innovative regions.