Reshaping the Economy? Local Reallocation Effects of Place-Based Policies
Sarah Fritz, Catherine van der List
CESifo Working Papers,
July
2025
Abstract
We study the effects of place-based policies on aggregate productivity using administrative data on projects co-financed by the EU in Italy linked to balance sheet data. We exploit quasi-experimental variation in funding for a large place-based policy stemming from measurement error in regional GDP estimates. Results show that the policy likely decreases productivity. Decompositions reveal that aggregate declines are driven by reallocation of labor to low-productivity firms. Mechanism analysis using firm-level event studies reveals that negative reallocation effects are caused by high-productivity firms taking up the funds and subsequently becoming more liquidity constrained, leading to slowdowns in employment growth.
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Jobs at IWH
Vacancies at IWH The Halle Institute for Economic Research (IWH) – Member of the Leibniz Association was founded in 1992. IWH’s tasks are economic research and science-based…
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12.06.2025 • 19/2025
Economic recovery in Germany – but structural problems and US trade policy weigh on the economy
The German economy has picked up somewhat in the first half of 2025. This was helped by the temporary increase in demand from the US in anticipation of higher tariffs. If the US does not escalate its trade conflicts further, production in Germany according to the summer forecast of the Halle Institute for Economic Research (IWH) is likely to increase a bit (by 0.4%) in 2025, after two years of decline. In March, the IWH economists were forecasting growth of 0.1% for the current year. Growth of 1.1% is forecast for the year 2026. Similar expansion rates are to be expected for East Germany.
Oliver Holtemöller
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Konjunktur aktuell: Konjunkturelle Belebung in Deutschland – strukturelle Probleme und US-Handelspolitik belasten
Konjunktur aktuell,
No. 2,
2025
Abstract
Wie es mit der internationalen Konjunktur in diesem und im kommenden Jahr weitergeht, hängt im Wesentlichen vom Fortgang der Handelskonflikte zwischen den USA und dem Rest der Welt ab. Alles in allem steigt die Weltproduktion in den Jahren 2025 und 2026 um jeweils 2,3%. Das größte weltwirtschaftliche Risiko besteht darin, dass die Handelskonflikte der USA mit der EU und insbesondere mit China weiter eskalieren. Für die deutsche Wirtschaft gibt es mehr und mehr Anzeichen für eine konjunkturelle Erholung, die jedoch ebenfalls erheblich von der möglichen Eskalation der US-Handelskonflikte gefährdet ist. Das Bruttoinlandsprodukt dürfte im Jahr 2025 mit 0,4% erstmals seit zwei Jahren wieder etwas zunehmen.
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Macroeconomic Reports
Macroeconomic Reports Local and global: IWH regularly provides current economic data – be it about the state of the East German economy, the macroeconomic development in Germany…
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Halle Institute for Economic Research
Between Energy Crisis and AI Boom The summer forecast of the Halle Institute for Economic Research (IWH) assumes that the Gulf conflict eases and energy prices do not rise…
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Economic Outlook
IWH Summer Forecast 2026 Between Energy Crisis and AI Boom June 11, 2026 Until the outbreak of the energy crisis, the German economy was on a path to recovery. Now the recovery…
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Evaluation of the InvKG and the federal STARK programme
Evaluation of the InvKG and the federal STARK programme Coal Regions Investment Act (InvKG) and the Federal Government’s STARK programme On behalf of the Federal Ministry for…
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From Rivals to Allies? CEO Connections in an Era of Common Ownership
Dennis Hutschenreiter, Qianshuo Liu
IWH Discussion Papers,
No. 7,
2025
Abstract
Institutional common ownership of firm pairs in the same industry increases the likelihood of a preexisting social connection among their CEOs. We establish this relationship using a quasi-natural experiment that exploits institutional mergers combined with firms’ hiring events and detailed information on CEO biographies. In addition, for peer firms, gaining a CEO connection from a hiring firm’s CEO appointment correlates with higher returns on assets, stock market returns, and decreasing product similarity between companies. We find evidence consistent with common owners allocating CEO connections to shape managerial decisionmaking and increase portfolio firms’ performance.
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IWH Flash Indicator
IWH Flash Indicator The IWH Flash Indicator is a forecasting tool which provides early information on economic development. While the German Federal Statistical Office publishes…
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