Trade, FDI and Cross-Variable Linkages: A German (Macro-)Regional Perspective

We analyse the evolution of German Trade and FDI activity within the EU27 using a simultaneous equation gravity approach for imports, exports, in- and outward FDI stocks based on German regional data (NUTS1-level) for 1993-2005. Our approach seeks to explore the main long-run driving forces of both trade/FDI and identify the likely linkages among them. Our motivation for a joint system estimation rests on the observation of a significant cross-equation residual correlation for single equation trade/FDI gravity models, which in turn opens up the possibility for enhancing estimation efficiency in a full information approach. 'On the fly' the simultaneous equation model also allows us to derive a measure for trade/FDI linkages based on the variance-covariance matrix of the system's error term. Adopting both a Hausman-Taylor (1981) IV approach (3SLS-GMM) and a rival non-IV estimator (the system extension to the Fixed Effects Vector Decomposition model recently proposed by Plümper \& Tröger, 2007) our main results are: We find empirical support for the chosen gravity setup as an appropriate framework in explaining German trade and FDI patterns with a prominent role given to trade costs (proxied by geographical distance). Looking at cross-variable linkages we find a substitutive link between trade (both ex-/imports) and outward FDI for the average of German states in line with earlier evidence for Germany, while imports and inward FDI are found complement each other. We also analyse the sensitivity of the results for regionally disaggregated sub-aggregates among the total pool of German state - EU27 country pairs. The results hint at structural differences among the trade and FDI activity of the two German Eastern and Western macro regions on the one hand, and also their interaction with the 'core' EU15 member states opposed to the overall EU27 aggregate on the other hand. Taking the West German - EU27 trade \& FDI relationship as an example, the identified pairwise linkages between the four variables closely follow the predictions of the New Trade theory model of Baldwin \& Ottaviano (2001): That is, when trade is merely of intra industry type with non-zero trade costs, the latter shift production abroad and lead to export replacement effects of FDI. However, at the same time outward FDI may stimulates trade via reverse good imports. For the West German - EU15 aggregate we even reveal complementaries among export and FDI activity, which have not been identified for German data before. This strongly advocates the importance of the regional dimension in analysing cross-variable linkages among trade and FDI.Trade, FDI, Panel Data, Simultaneous equations

Internal Migration, Regional Labour Market Dynamics and Implications for German East-West Disparities – Results from a Panel VAR

This paper analyses the causal linkages between regional labour market variables and internal migration flows among German states between 1991–2006. We adopt a Panel VAR approach to identify the feedback effects among the variables and analyse the dynamic properties of the system through impulseresponse functions.We also use the model to track the evolution of the particular East-West migration since re-unification aiming to shed more light on the East German “empirical puzzle”, characterized by lower migration responses than expected from the regional labour market position relative to the West. We indeed get evidence for such a puzzle throughout the mid-1990s, which is likely to be caused by huge West-East income transfers, a fast exogenously driven wage convergence and the possibility of East-West commuting. However, we also observe an inversion of this relationship for later periods:That is, along with a second wave of East-West movements around 2001 net flows out of East Germany were much higher than expected after controlling for its weak labour market and macroeconomic performance. Since this second wave is also accompanied by a gradual fading out of economic distortions, this supports the view of “repressed” migration flows for that period.Internal migration, Panel VAR, System GMM

Trade-FDI Linkages in a System of Gravity Equations for German Regional Data

We analyse the nature of German trade-FDI linkages within the EU27 based on a simultaneous equation gravity approach for imports, exports, in- and outward FDI stocks.We adopt both a Hausman-Taylor (1981) IV approach (3SLS-GMM) and rival non-IV estimation (the system extension to the Fixed Effects Vector Decomposition model recently proposed by Plümper & Tröger, 2007).Turning to the results, both estimators give empirical support for our chosen gravity setup as an appropriate framework in explaining German trade and FDI activity. Looking carefully at cross-variable linkages we basically find substitutive links between trade flows and outward FDI in line with earlier empirical evidence for Germany. Building upon German state level data we are also able to analyse the sensitivity of the results for regional sub-samples. The latter disaggregation hints at structural differences among the trade and FDI activity of the twoWest and East German macro regions on the one hand, and also their interaction with the ’core’ EU15 member states opposed to the overall EU27 aggregate on the other hand.TakingWest German–EU27 trade & FDI as an example, the identified pairwise linkages closely follow the theoretical predictions of New Trade Theory models as in Baldwin & Ottaviano (2001): That is, when trade is merely of intra-industry type with non-zero trade costs,we observe export replacement effects of FDI.However, at the same time outward FDI stimulates trade via reverse good imports. For the West German–EU15 sub-sample we even reveal complementaries among export and outward FDI activity.This strongly advocates to care for the regional dimension in analysing cross-variable linkages of trade and FDI.Trade, FDI, panel data, simultaneous equations

Effectiveness of Public R&D Subsidies in East Germany – Is it a Matter of Firm Size?

This paper analyses the impact of public subsidies on private sector research and development (R&D) activity for East German firms. Using propensity score matching, our empirical results indicate that subsidized firms indeed show a higher level of R&D intensity and a higher probability for patent application compared to non-subsidized firms for our sample year 2003. On average we find an increase in the R&D intensity of about 3.7 percentage points relative to non-subsidized firms. The probability for patent applications rises by 21 percentage points. These results closely match earlier empirical results for East Germany. Given the fact that the East German innovation system is particularly driven by small and medium sized enterprises (SME), we put a special focus on the effectiveness of the R&D subsidies for this latter subgroup. Here no previous empirical evidence is available so far. Our findings indicate that policy effectiveness also holds for private R&D activity of SMEs, where the highest increase in terms of R&D intensity is estimated for micro businesses with up to 10 employees.Propensity score matching; R&D subsidies; East Germany; SME

Regressionsanalyse mit Panel-Daten: eine Einführung

'Dieser Beitrag gibt eine Einführung in die verschiedenen Verfahren zur regressionsanalytischen Behandlung von Panel-Daten, in der auf Ableitungen und eine extensive Benutzung von Matrix-Algebra verzichtet wird. Allerdings kann die Darstellung nicht ganz ohne eine formale Schreibweise auskommen, wobei jedoch im letzten Abschnitt anhand eines konkreten Rechenbeispiels die benutzten Formeln näher erläutert werden. Auf diese Weise möchte der Beitrag einserseits aufzeigen, daß die Regressionsanalyse mit Panal-Daten im wesentlichen nur auf rechentechnisch einfach durchzuführende Transformationen der Daten hinausläuft und mit Hilfe der üblichen Statistik-Programmpakete (z. B. SPSS) durchgeführt werden kann, und andererseits einen leichten Zugang zur bestehenden Lehrbuchliteratur ermöglichen.' (Autorenreferat)'This article gives a short introduction into existing methods of investigating panel data by means of regression analysis without relying on extensive use of matrix algebra and formal derivatives. Although a formal presentation can not be completely avoided, a simple example is given in the final section to illustrate the main formulas. By doing this, the article is intended on the hand, to show that regression analysis of panel data requires in essence only straightforward transformations of data, and the other hand, to permit a more readily accessability to the textbook literature for interested readers.' (author's abstract)

Investitionsverhalten in der Weimarer Republik: ein Überblick

Im Rahmen der Borchardt-Kontroverse diskutieren Wirtschaftshistoriker über die Ursachen der Stagnation der wirtschaftlichen Entwicklung in der Weimarer Republik. Ein umstrittener Gegenstand dieser Debatte ist die geringe Investitionstätigkeit der deutschen Wirtschaft vor dem Einsetzen der Weltwirtschaftskrise. In jüngster Zeit haben verschiedene Autoren versucht, die Bestimmungsfaktoren für das Investitionsverhalten auf ökonometrischem Wege zu bestimmen, wobei sich jedoch scheinbar nur schwer ein Konsens zwischen den empirischen Ergebnissen herstellen läßt. Der Autor gibt in seinem Beitrag einen Überblick über diese Diskussion und legt eine kritische Bewertung der Ergebnisse vor. Hierzu wird auf Fragen der theoretischen Fundierung und der Datenauswahl eingegangen, die sich allgemein beim Versuch ergeben, eine makroökonomische Investitionsfunktion für die Zwischenkriegszeit zu schätzen. Zusammenfassend wird festgestellt, 'daß einer empirischen Überprüfung der Borchardt-Hypothese schwerwiegende Datenprobleme gegenüberstehen.' (ICD)'Since nearly two decades economic historians have been (in the context of the so-called Borchardt-controversy) discussing the causes of the economic stagnation in the Weimar Republic, compared to the development observed before 1914 and after 1945. A highly disputed issue in this debate turned out to be the low investment behaviour of the German economy even before the beginning of the Great Depression. Recently, various authors have attempted to evaluate the determinants of investment behaviour by means of econometric methods, but, seemingly is intended to give an overview over these studies and to critically review the empirical findings. The now present first part will deal with questions of theoretical foundation and choice of date which generally arise in estimating a macroeconomics investment function for the interwar period. A second part, coming out later, will treat questions of empirical modelling, and the attention will be drawn to the problem of using time series econometrics for a period as short as the time between the wars.' (author's abstract

Perspektiven der EU-Osterweiterung: Gesamt- und regionalwirtschaftliche Ergebnisse

Im Gegensatz zum Finanzierungsbedarf der EU-Osterweiterung sind die realwirtschaftlichen Vor- und Nachteile empirisch nur schwer zu bestimmen. In diesem Beitrag stellen Dr. Björn Alecke und Dr. Gerhard Untiedt, Gesellschaft für Finanz- und Regionalanalysen (GEFRA), Münster, die Ergebnisse der Studien vor, die versuchen, mit Hilfe von so genannten Computable General Equilibrium (CGE)-Modellen die ökonomischen Auswirkungen von durch die EU-Osterweiterung induzierten Änderungen in der Handels-, Agrar- oder Strukturpolitik zu ermitteln. Drei wichtige Ergebnisse, die sich in allen Untersuchungen zeigen, sind: Erstens fallen die Auswirkungen der EU-Osterweiterung auf die mittel- und osteuropäischen Beitrittsländer sehr viel stärker aus als auf die gegenwärtigen EU-Mitgliedsländer. Zweitens ergeben sich auch für die gegenwärtigen Mitgliedstaaten insgesamt Wohlfahrtsgewinne. Und drittens streuen die Wohlfahrtsgewinne in den gegenwärtigen Mitgliedsländern stark in regionaler wie sektoraler Hinsicht. In der Regel zeigt sich, dass die Wohlfahrtsgewinne umso größer ausfallen, je größer die Handelsanteile der Länder bzw. Regionen mit den MOEL sind. Diese wiederum sind eine Funktion der räumlichen Nähe. Im Gegensatz zur regionalen Verteilung kann eine eindeutige Aussage zur sektoralen Verteilung der Wohlfahrtsgewinne nicht getroffen werden.EU-Erweiterung, Osteuropa, Wohlfahrtseffekt, Räumliche Verteilung

Regionale Wachstumseffekte der GRW-Förderung? - Eine räumlich-ökonometrische Analyse auf Basis deutscher Arbeitsmarktregionen

Die Gemeinschaftsaufgabe „Verbesserung der regionalen Wirtschaftsstruktur“ (GRW) ist das zentrale wirtschaftspolitische Instrument zur Förderung entwicklungsschwacher Regionen in Deutschland seit Ende der 1960er Jahre. Seit der deutschen Wiedervereinigung kommt es zudem flächendeckend in den neuen Bundesländern zur Förderung der privaten Investitionstätigkeit und wirtschaftsnahen Infrastruktur zum Einsatz. In dieser Untersuchung wird der Einfluss der GRW-Förderung auf das Produktivitätswachstum der 225 deutschen Arbeitsmarktregionen im Zeitraum von 1994 bis 2006 empirisch untersucht. Ausgangspunkt ist eine neoklassisch motivierte Konvergenzgleichung. Die Schätzergebnisse zeigen für verschiedene Modellspezifikationen einen signifikant positiven Einfluss der Förderung auf das Produktivitätswachstum der geförderten Arbeitsmarktregionen. Es wird gezeigt, dass sich die Konvergenzgeschwindigkeit für Regionen deutlich unterhalb ihres steady state nahezu verdoppelt. Um die Robustheit der Ergebnisse zu überprüfen, wird das klassische ökonometrische Modell schließlich um „räumliche“ Komponenten erweitert. Sowohl für das Spatial Durbin- und auch das Spatial Durbin Error-Modell ergeben sich negative Spillovereffekte der GRW-Förderung. Dieser indirekte Effekt bleibt stabil, wenn räumliche Lags weiterer erklärender Variablen in die Schätzgleichung aufgenommen werden. Er kann u.a. damit erklärt werden, dass die geförderte Region im Standortvergleich attraktiver wird und somit – wie politisch gewollt – Investitionen aus anderen Regionen „abzieht“. Im Resultat führen die negativen räumlichen Spillover-Effekte zu einer Verlangsamung der Konvergenzgeschwindigkeit, allerdings bleibt der Gesamteffekt der GRW-Förderung weiterhin positiv.GRW-Förderung; Arbeitsmarktregionen; Konvergenz; Spatial-Durbin-Modell; Spatial Durbin Error-Modell; Spillover-Effekt

Regionale Wachstumseffekte der GRW-Förderung?: Eine räumlich-ökonometrische Analyse auf Basis deutscher Arbeitsmarktregionen

This paper provides an analysis of the impact of the German “Joint Task for the Improve-ment of Regional Economic Structures” (GRW) on labour productivity growth of 225 German labour market regions for the period 1994 to 2006. The empirical regression approach builds on a “Barro-type” growth equation, where a special focus is given to the policy instrument as additional right hand side regressor. The results show that for different model specifications the direct effect of the regional policy instrument on labour productivity growth remains statistically significant and positive for almost two thirds of the supported labour markets. In order to check for the robustness of the results we also augment the standard regression approach to the field of spatial econometrics. Here the results for the Spatial Lag model show that we observe a strong positive spatial spillover effect for productivity growth among neighbouring regions. If we additionally include further spatial lags of the right hand side regressors in the growth equation, the estimated coefficients for the resulting Spatial Durbin and Spatial Durbin Error model indicate that there is a negative spillover effect from the GRW policy on neighbouring regions. This effect remains stable, if we add further spatial lags of other explanatory variables. The indirect distorting effect of the GRW programme yields to the result that only for about 45% of supported regions a positive overall effect was found (with an initial income level up to 73% of the non-funded West German labour markets)

Trade, FDI and Cross-Variable Linkages: A German (Macro-)Regional Perspective

We analyse the evolution of German Trade and FDI activity within the EU27 using a simultaneous equation gravity approach for imports, exports, in- and outward FDI stocks based on German regional data (NUTS1-level) for 1993-2005. Our approach seeks to explore the main long-run driving forces of both trade/FDI and identify the likely linkages among them. Our motivation for a joint system estimation rests on the observation of a significant cross-equation residual correlation for single equation trade/FDI gravity models, which in turn opens up the possibility for enhancing estimation efficiency in a full information approach. 'On the fly' the simultaneous equation model also allows us to derive a measure for trade/FDI linkages based on the variance-covariance matrix of the system's error term. Adopting both a Hausman-Taylor (1981) IV approach (3SLS-GMM) and a rival non-IV estimator (the system extension to the Fixed Effects Vector Decomposition model recently proposed by Plümper \& Tröger, 2007) our main results are: We find empirical support for the chosen gravity setup as an appropriate framework in explaining German trade and FDI patterns with a prominent role given to trade costs (proxied by geographical distance). Looking at cross-variable linkages we find a substitutive link between trade (both ex-/imports) and outward FDI for the average of German states in line with earlier evidence for Germany, while imports and inward FDI are found complement each other. We also analyse the sensitivity of the results for regionally disaggregated sub-aggregates among the total pool of German state - EU27 country pairs. The results hint at structural differences among the trade and FDI activity of the two German Eastern and Western macro regions on the one hand, and also their interaction with the 'core' EU15 member states opposed to the overall EU27 aggregate on the other hand. Taking the West German - EU27 trade \& FDI relationship as an example, the identified pairwise linkages between the four variables closely follow the predictions of the New Trade theory model of Baldwin \& Ottaviano (2001): That is, when trade is merely of intra industry type with non-zero trade costs, the latter shift production abroad and lead to export replacement effects of FDI. However, at the same time outward FDI may stimulates trade via reverse good imports. For the West German - EU15 aggregate we even reveal complementaries among export and FDI activity, which have not been identified for German data before. This strongly advocates the importance of the regional dimension in analysing cross-variable linkages among trade and FDI