Firm Subsidies, Financial Intermediation, and Bank Risk
IWH Discussion Papers,
We study whether government subsidies can stimulate bank funding of marginal investment projects and the associated effect on financial stability. We do so by exploiting granular project-level information for the largest regional economic development programme in Germany since 1997: the Improvement of Regional Economic Structures programme (GRW). By combining the universe of subsidised firms to virtually all German local banks over the period 1998-2019, we test whether this large-scale transfer programme destabilised regional credit markets. Because GRW subsidies to firms are destabilised at the EU level, we can use it as an exogenous shock to identify bank responses. On average, firm subsidies do not affect bank lending, but reduce banks’ distance to default. Average effects conflate important bank-level heterogeneity though. Conditional on various bank traits, we show that well capitalised banks with more industry experience expand lending when being exposed to subsidised firms without exhibiting more risky financial profiles. Our results thus indicate that stable banks can act as an important facilitator of regional economic development policies. Against the backdrop of pervasive transfer payments to mitigate Covid-19 losses and in light of far-reaching transformation policies required to green the economy, our study bears important implications as to whether and which banks to incorporate into the design of transfer Programmes.
IWH Bankruptcy Research
IWH Bankruptcy Research The Bankruptcy Research Unit of the Halle Institute for...
Who Buffers Income Losses after Job Displacement? The Role of Alternative Income Sources, the Family, and the State
LABOUR: Review of Labour Economics and Industrial Relations,
Using survey data from the German Socio‐Economic Panel (SOEP), this paper analyses the extent to which alternative income sources, reactions within the household context, and redistribution by the state attenuate earnings losses after job displacement. Applying propensity score matching and fixed effects estimations, we find that income from self‐employment reduces the earnings gap only slightly and severance payments buffer losses in the short run. On the household level, we find little evidence for an added worker effect whereas redistribution by the state within the tax and transfer system mitigates income losses substantially.
United Country – Three Decades After the Wall Came Down
The Berlin Wall, once the symbol of the divided Germany, has now been gone for longer than it ever existed. But the differences within the country are still visible. However, recent research suggests that different economic development does not always follow the former inner-German border. Apart from the west-east divide, differences also emerge between the south and the north or between the cities and the country.
Does Extended Unemployment Benefit Duration Ameliorate the Negative Employment Effects of Job Loss? ...
Data Protection Policy ...
Gross domestic product
Gross domestic product Gross domestic product (GDP) includes the value of all goods and services produced in an economic area during a specific period of time. It is ...
Auf welche Frage sind zwei Billionen die Antwort?
Wirtschaft im Wandel,
Alle Jahre wieder wird berechnet, was wohl die Deutsche Einheit gekostet habe. Zuletzt veröffentlichte die Welt am Sonntag, dass knapp zwei Billionen Euro an Fördergeldern von West nach Ost geflossen seien. Die Berechnung dieser Kennzahl ist wenig umstritten, die Größenordnung ist einigermaßen plausibel: Es werden Nettotransfers von West nach Ost zwischen 1991 und 2013 aufsummiert (Zahlungen aus dem Länderfinanzausgleich, Solidarpakt II, Fonds Deutsche Einheit, regionaler Saldo der Sozialversicherungsleistungen usw.). Aber was bedeutet diese Zahl? Sind zwei Billionen Euro viel oder wenig in Relation zu dem damit Erreichten?