Structural funds and β-convergence of German counties

Although the German federal and regional governments have considerably supported financially weak municipalities in economically underdeveloped regions, economic disparities between Western and Eastern Germany are still present. To close the imbalances between economically developed and underdeveloped counties, federal and regional governments financially support municipal investment. This study examines unconditional and conditional beta-convergence of German counties and investigates the role played by the structural transfers, as the theoretical and empirical literature provides conflicting guidance. Therefore, we employ a data set on German counties from 2010 to 2019. This study examines the effect of structural funds at the county level, and considers endogeneity and spatial autocorrelation. The overall results reveal unconditional and conditional convergence of German counties and highlight the positive impact of structural funds on cumulative economic growth.