CEU Electronic Theses and Dissertations, 2025
| Author | Lee, Evan |
|---|---|
| Title | Infrastructure Investment as Industrial Policy: Evidence from the Solidarpakt II in Eastern Germany |
| Summary | This thesis investigates the effectiveness of special-need federal budgetary transfers (Sonderbedarfs- Bundesergä nzungszuweisung en - SoBEZ) in eastern Germany as a tool of industrial and regional policy. Using a novel district-level exposure index for unobserved federal equalization policy and a two-stage least squares (2SLS) instrumental variable strategy, the study estimates the empirical impact of infrastructure spending on productivity, employment, wages, and net migration at the district (NUTS 3) level. The analysis leverages state and municipal finance data, addressing endogeneity concerns through coarsened exact matching (CEM) methods. Findings reveal that targeted infrastructure investment yields measurable gains in manufacturing productivity and employment, particularly in urban areas with strong absorptive capacity. However, the effects are heterogeneous: there is little evidence for significant impacts on net migration or total compensation, and the benefits do not extend evenly to rural areas or other economic sectors. The study highlights methodological challenges inherent in evaluating large-scale regional policy interventions, including data gaps and overlapping policy interventions. Overall, the results support the view that while infrastructure investment can drive sector-specific development, its capacity to effect regional convergence is limited. |
| Supervisor | Kahanec, Martin |
| Department | Public Policy MA |
| Full text | https://www.etd.ceu.edu/2025/lee_evan.pdf |
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