The Persistent Effects of Place-based Policy: Evidence from the West-German Zonenrandgebiet

We show that temporary place-based subsidies generate persistent effects on economic density. As our design allows us to control for agglomeration economies, we attribute an important role to policy-induced locational advantage (e. g. capital structures) in explaining persistent spatial patterns of economic activity. With regard to distributional implications, we show that subsidies have capitalized in land rents, so pre-treatment land owners have benefited predominantly from the program.