Public Sector Centralization and Productivity Growth: Reviewing the German Experience

38 Pages Posted: 8 Aug 2002

See all articles by Thiess Buettner

Thiess Buettner

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg; CESifo (Center for Economic Studies and Ifo Institute)

Alexej Behnisch

Bangor University - Department of International Politics

Dan Stegarescu

Center for European Economic Research (ZEW)

Date Written: January 15, 2002

Abstract

The paper examines the role of the vertical structure of the public sector for economic growth in Germany in a long-term perspective. A theoretical model shows that, due to spillover effects of public service provision across lower level governments, federal government activities could have substantially contributed to productivity growth. A review of the German experience starting in the last quarter of the 19th century shows that the overall development is consistent with a stimulating role of the federal government in general and in specific areas like, for instance, transport and communication. However, a further empirical analysis of the period after World War II raises doubts about the efficiency of the vertical structure of the public sector with regard to productivity growth, since the results indicate that a smaller budget share of the state level would have benefited growth.

Keywords: Public sector centralization, public inputs, economic growth, fiscal federalism

JEL Classification: H72, H77, O11

Suggested Citation

Buettner, Thiess and Behnisch, Alexej and Stegarescu, Dan, Public Sector Centralization and Productivity Growth: Reviewing the German Experience (January 15, 2002). ZEW Discussion Paper No. 02-03, Available at SSRN: https://ssrn.com/abstract=319324 or http://dx.doi.org/10.2139/ssrn.319324

Thiess Buettner (Contact Author)

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

Lange Gasse 20
Nürnberg, Bavaria 90403
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Alexej Behnisch

Bangor University - Department of International Politics ( email )

Aberystwyth SY23 3DA
United Kingdom

HOME PAGE: http://www.abehnisch.com/

Dan Stegarescu

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany
+49 621 1235 167 (Phone)
+49 621 1235 215 (Fax)

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