Structural Policy in East Germany – A Discussion about the Common Task “Improvement of Regional Economic Structure“
Wirtschaft im Wandel,
After the reunification – more than ten years ago – the convergence process in the eastern German regions has started. Unfortunately, the convergence process has decelerated since 1995. For this reason, economists and politicians are discussing the kind of government aid, which has been applied since the early nineties. The paper deals with the Common Task “Improvement of Regional Economic Structure“ (Gemeinschaftsaufgabe “Verbesserung der regionalen Wirtschaftsstruktur“). It is one of the most important instruments for the “Reconstruction East“. Empirical studies have shown that this instrument has led to an additional growth impulse. However, for the last ten years the budget of the Common Task has decreased. Under the restriction of scarce financial resources the governments of the federal states have to adjust their regional programmes. Economists and politicians dispute to change unselective into selective (regional and sectoral) government aid. The article shows that in particular the Federal State of Brandenburg as well as the Free State of Saxony are focusing the Common Task on specific industrial sectors and certain regions.
Effects of the promotion of investment in East Germany
IWH Discussion Papers,
Investment in East Germany is heavily subsidized. Econometric estimates based on a treatment approach show that the level of investment is significantly higher in firms being supported by state aid. Nevertheless, capital productivity is lower in East Germany, indicating a misallocation of capital. Additionally, there are negative effects in West Germany due to negative crowding-out effects. Therefore state aid in East Germany should be reduced in the medium run.
Regional structural policy in an enlarged EU: A reform proposal
Wirtschaft im Wandel,
Recently, the EC-Commission has presented its ideas for future cohesion policies after the enlargement of the EU by Eastern European states. By applying the actual rules in an enlarged EU, financial aid would be concentrated in the East European countries. In this article it is argued that the criteria for success to the structural funds should not be altered, but that there should be a phasing out of aid for the regions in Western Europe. Additionally, funding under the cohesion fund and the objective 2- and objective-3-shemes should be terminated to get enough financial means to finance objective-1-programmes.