State innovation funding: When it comes to effectiveness, it’s worth taking a second look

DIW Weekly Report 22/2009, pp. 358-366

The Federal Government’s Economic Stimulus Packages I and II are intended to help overcome the economic crisis and improve the economic framework conditions in Germany. An essential component is additional public investment of 19.7 billion euros in “infrastructure”. The decisions on this measure focus on the short-term stimulation of the economy. However, additional public investment also offers the opportunity to increase the long-term growth potential of the German economy. In this way, long-term growth impulses could also be generated from the current economic crisis. Accordingly, public investment should be planned in such a way that it leads to improvements in those areas in which Germany has the greatest need to catch up in a European comparison. A detailed comparison with the EU-15 countries reveals that Germany’s greatest need for investment is in the education and healthcare systems. Relatively weakly developed in Germany are also the information and communication sector and the information society (for example, broadband connections, provision of computers and internet access at schools) as well as innovation, research and development. In contrast, no urgent additional need for investment in basic infrastructure such as roads, railways or waterways can be identified. Overall, the investment measures planned within the framework of the two economic stimulus packages urgently need to be steered in a target-oriented manner with a view to their growth effect.

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