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Fiscal Transfers and Regional Economic Growth

30 Pages Posted: 15 Oct 2016  

Herbert Dawid

Bielefeld University - Department of Business Administration and Economics; Center for Mathematical Economics

Philipp Harting

Bielefeld University - Faculty of Business Administration and Economics

Michael Neugart

Technische Universität Darmstadt

Date Written: October 2016

Abstract

In the aftermath of the financial crisis, with periphery countries in the European Union even more falling behind the core countries economically, there have been quests for various kind of fiscal policies in order to revert divergence. How these policies would unfold and perform comparatively is largely unknown. We analyze four such stylized policies in an agent-based macroeconomic model and study the economic mechanisms behind their relative success. Our main findings are that the core country sharing the debt burden of the periphery country has almost no effect on the growth dynamics of that region, fiscal transfers have a positive short and long run impact on per capita consumption in the target region, and that technology oriented firm subsidies have the strongest positive long run impact on competitiveness of the periphery country at which they are targeted. The positive effect of the technology oriented policy is reinforced if combined with household transfers.

Keywords: fiscal transfers, regional economic growth, agent-based macroeconomic model

JEL Classification: C63, E62, O33

Suggested Citation

Dawid, Herbert and Harting, Philipp and Neugart, Michael, Fiscal Transfers and Regional Economic Growth (October 2016). Bielefeld Working Papers in Economics and Management No. 09-2016. Available at SSRN: https://ssrn.com/abstract=2852316

Herbert Dawid (Contact Author)

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany
+49-521-1064843 (Phone)
+49-521-1062994 (Fax)

Center for Mathematical Economics ( email )

Postfach 10 01 31
Bielefeld, D-33501
Germany

Philipp Harting

Bielefeld University - Faculty of Business Administration and Economics ( email )

Universitätsstraße 25
Bielefeld, DE 33615
Germany

Michael Neugart

Technische Universität Darmstadt ( email )

Bleichstraße 2
Darmstadt, 64283
Germany

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