Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Sep, 2022, Volume 90, Issue 5

Market Size and Spatial Growth—Evidence From Germany's Post-War Population Expulsions

https://doi.org/10.3982/ECTA18002
p. 2357-2396

Michael Peters

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, 8 million 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 large and persistent effects on the size of the local population, manufacturing employment, and income per capita. 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 estimated model implies that the refugee settlement increased aggregate income per capita by about 12% after 25 years and triggered a process of industrialization in rural areas.


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Supplemental Material

Supplement to "Market Size and Spatial Growth - Evidence from Germany’s Post-War Population Expulsions"

Michael Peters

This online appendix contains material not found within the manuscript.

Supplement to "Market Size and Spatial Growth - Evidence from Germany’s Post-War Population Expulsions"

Michael Peters

This zip file contains replication files for the manuscript.  There is also an additional appendix within the replication files.

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