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Spillover, Efficiency, and Equity Effects of Regional Firm Subsidies

Sebastian Siegloch et al.

American Economic Journal: Economic Policy2025https://doi.org/10.1257/pol.20220667article
AJG 3ABDC A*
Weight
0.64

Abstract

We analyze the effects of a large place-based policy, subsidizing up to 50 percent of the investment costs of East German manufacturing plants. We show that a 1 percentage point decrease in subsidy rate leads to a 1 percent decrease in manufacturing employment. We document important local spillovers for the untreated construction and retail sectors, counties connected via trade, and local tax rates. There is no evidence for regional reallocation, within-firm spillover, or changes in commuting and residential decisions. The cost per job amounts to about $19,000. We show local subsidies are substantially more effective in curbing regional inequality than place-blind policies. (JEL G31, H71, L60, L74, L81, R23, R51)

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https://doi.org/https://doi.org/10.1257/pol.20220667

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@article{sebastian2025,
  title        = {{Spillover, Efficiency, and Equity Effects of Regional Firm Subsidies}},
  author       = {Sebastian Siegloch et al.},
  journal      = {American Economic Journal: Economic Policy},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1257/pol.20220667},
}

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Spillover, Efficiency, and Equity Effects of Regional Firm Subsidies

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Evidence weight

0.64

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.68 × 0.4 = 0.27
M · momentum0.93 × 0.15 = 0.14
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.