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In this paper we take a detailed look at the sectoral anatomy of regional growth in German regions over the period 1978-2008. In the aggregate, the German economy is characterized by a secular decline of the manufacturing sector and a rise of the modern service economy. This trend of structural change (Petty?s law) by no means occurs uniformly across space, however. Some regions exhibit this trend even at an accelerated pace, while other regions develop their local economic structures against the trend and expand their manufacturing bases. We first develop a novel empirical approach that allows us to categorize all German regions into one out of three groups with ?pro-trend?, ?anti-trend? or ?featureless? regional growth. ?Pro-trend? regions exhibited a similar direction of industrial change like the nation as a whole, but at an accelerated speed. That is, booming industries tended to grow faster than in the national average while declining industries tended to disappear faster. Conversely, in ?anti-trend? regions industries grew that declined elsewhere, while national boom industries declined. In a second step, we then compare these different groups of regions from a descriptive point of view and report some interesting stylized facts about the initial characteristics and the subsequent growth performances of ?pro-trend? and ?anti-trend? regions. We show, for example, that the ?pro-trend? pattern tends to come with the best overall performance. Yet, this profile where regions forge ahead in developing a modern service economy was neither a guarantee nor a prerequisite for regional success. Many ?anti-trend? regions also had growth rates well above the national average. In other words, we observe strong differences in the sectoral anatomy of growth across regions that performed equally well overall. Finally, investigating the causes of these differential regional trends, we show that the exposure to international trade is an important reason of the divergent patterns of local industrial change.

Governments in several countries have recently spent considerable effort to defend domestic firms against acquisition attempts from abroad and instead favoured mergers among national firms. In this paper we offer an explanation why globalization can reinforce the case for promoting “national champions”. We analyze an oligopolistic market where a domestic and a foreign firm are engaged in a takeover battle for a domestic competitor. Any merger or acquisition (M&A) must be approved by the national government whose objective function may include a bias against the foreign takeover. That bias endogenously results from lobbying efforts of the domestic firm that would become the outsider in the foreign acquisition scenario. In the case where the government is unbiased and only cares about welfare we find that falling trade barriers trigger the cross-border acquisition. However, when the domestic government cares sufficiently strongly about lobbying contributions, globalization has a qualitatively different effect. The foreign takeover would then only emerge in an intermediate range of trade costs.Once trade integration reaches a critical level the biased government starts to block the foreign takeover and instead opens the door for the national champion.

One of the most prominent instruments of regional policy is to foster education and human capital formation in economically lagging regions. However, regional policy of this type can actually hurt instead of help the poor areas. The reason is that individual geographical mobility increases with the personal skill level. Through education subsidies, particularly if targeted on relatively high skilled workers, individuals can cross some threshold level of qualification beyond which emigration accrues. Regional policies then result in a human capital flight harmful to individuals remaining in the economic periphery. This fatal result does not hold for such policies that foster basic education and focus on the relatively low skilled.

I discuss four theoretical models of international trade with heterogeneous firms à la Melitz (2003, Econometrica). The first chapter represents a critical reconsideration of sector definitions as proposed in the global sourcing model by Antràs and Helpman (2004, Journal of Political Economy). The second model extends the Antràs and Helpman framework by endogenous complexity choice of firms. The third chapter explores the strategic incentive of countries to invest into their technological potential. The last chapter discusses welfare effects of horizontal FDI. Ich entwickle vier Modelle der neueren Außenhandelstheorie mit heterogenen Firmen à la Melitz (2003, Econometrica). Das erste Kapitel stellt einen kritischen Kommentar zu den Sektordefinitionen aus Antràs und Helpman (2004, Journal of Political Economy) dar. Das zweite Modell erweitert den Antràs und Helpman Rahmen um die endogene Komplexitätswahl von Firmen. Das dritte Kapitel untersucht den strategischen Anreiz von Ländern, in ihr technologisches Potenzial zu investieren. Das letzte Kapitel diskutiert die Wohlfahrtseffekte von horizontalen ausländischen Direktinvestitionen.