ZEW Discussion Papers
Public Sector Centralization and Productivity Growth: Reviewing the German Experience
Behnisch, Alexej, Thiess Büttner und Dan Stegarescu (2002), Public Sector Centralization and Productivity Growth: Reviewing the German Experience, ZEW Discussion Paper No. 02-03, Mannheim. Download
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
