Caution to place makers: Greater firm density does not always promote incumbent firm health

William Kerr, Oliver Falck, Christina Günther, Stephan Heblich 11 February 2013

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A common theme in economic geography is that increasing returns to scale at the local level are essential for explaining the geographical distribution of economic activity. These agglomerative forces are often cited as a rationale for policy intervention to attract new firms to areas. Tight geographic concentration, however, can also raise countervailing costs as firms compete for local inputs. This makes the gains from increased spatial concentration around incumbent firms uncertain.

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Topics:  Industrial organisation

Tags:  Germany, clusters, agglomeration, East Germany

Muffled jumpstart

Hans-Werner Sinn, Gerlinde Sinn 09 November 2009

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Germany’s political unification has succeeded; its economic unification has not. Twenty years after the fall of the Berlin wall, GDP per capita in the formerly communist area is 69% of that of the former Federal Republic of Germany including West Berlin. This value sounds better than it is, as it is artificially inflated by civil servants’ wages and salaries, which have reached West German levels. East Germany’s privately produced GDP per capita is only about 66% of the West German level.

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Topics:  Europe's nations and regions

Tags:  Germany, unification, East Germany, wage fixing

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