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  • Can increases in the size of the local workforce raise productivity and spur economic development? This paper uses a particular historical episode to study this question empirically. After the Second World War, between 1945 and 1948, about 8m Ethnic Germans were expelled from their domiciles in Middle and Eastern Europe and transferred to counties in Western Germany. At the time, this inflow amounted to almost 20% of the Western German population. Using the variation across counties I study the effects of the refugee inflow on regional economic outcomes in the 50s and 60s. I find that refugee-inflows are positively correlated with income per capita, overall manufacturing employment and the entry of new plants. Importantly, the long-run effect on income per capita are much larger than the short-run effects. To explain this finding, I propose a new dynamic spatial model of semi-endogenous growth, where local productivity growth responds to local market size. The model makes tight predictions on the long-run distribution of economic activity and implies that the productivity effects of a shock to the local population can build up slowly if labor mobility is limited. When calibrated to the empirical estimates, the model implies that the inflow of refugees increased aggregate income pc by 3% after 10 years. (xsd:string)
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  • Refugees and Endogenous Local Productivity - Evidence from Germany’s Post-War Population Expulsions (xsd:string)
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  • 53, 2019 (xsd:string)
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