Fiscal Transfers and Regional Economic Growth

Prof.dr. Herbert Dawid, University of Bielefeld, Germany

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 impact on per capita consumption in both regions, and that technology oriented firm subsidies have the strongest positive long run impact on competitiveness of the periphery country at which they are targeted, in particular, if combined with household transfers. The technology policy requires a relatively small union-wide budget.

About the speaker

Venue: room A0.23 (School of Business and Economics, Tongersestraat 53)

Date: 12 October 2016

Time: 12:00 - 13:00  CET