Working Paper: NBER ID: w29329
Authors: Michael Peters
Abstract: Virtually all theories of economic growth predict a positive relationship between population size and productivity. In this paper I study a particular historical episode to provide direct evidence for the empirical relevance of such scale effects. In the aftermath of the Second World War about 8m ethnic Germans were expelled from their domiciles in Eastern Europe and transferred to West Germany. This inflow increased the German population by almost 20%. Using variation across counties I show that the settlement of refugees had a large and persistent effect on the size of the local population, manufacturing employment and income per capita. I show that these findings are quantitatively consistent with an idea-based model of spatial growth if population mobility is subject to frictions and productivity spillovers occur locally. The model implies that the refugee settlement increased aggregate income per capita by about 12% after 25 years and that the historical settlement rule triggered persistent industrialization of rural areas.
Keywords: population size; productivity; refugee settlement; economic growth; Germany
JEL Codes: O11; O4; R11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| refugee inflows (F22) | local population size (R23) |
| local population size (R23) | local productivity (O49) |
| refugee inflows (F22) | manufacturing employment growth (O14) |
| refugee inflows (F22) | local productivity (O49) |
| initial allocation of refugees (F35) | local population size (R23) |
| refugee settlement (F22) | aggregate income per capita (E10) |
| refugee settlement (F22) | short-run income per capita (E25) |
| local productivity (O49) | local workforce size (J21) |