Business Intelligence

Does Regional Redistribution Spur Growth?

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Executive Summary

After the German reunification, interregional subsidies accounted for approximately four percent of gross fixed capital investment in the new federal states. The authors show that between 1992 and 2005 infrastructure and (small) business aid had a negative net impact on regional economic growth. This suggests that regional redistribution was ineffective, potentially due to a lack of spatial concentration to create growth poles. The regional redistribution of capital after the German reunification has been sizeable. From 1991 to 2007 investment projects totaling ?237 billion have been supported with subsidies of ?58.7 billion under the Joint Agreement for the Improvement of Regional Economic Structures.

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