Mostafa Lotfalipour

• This thesis investigates how government policy shapes regional economic development in Germany, with a specific focus on subnational disparities that aggregate-level analyses frequently neglect. Adopting a disaggregated NUTS-3 framework, the study analyzes the impact of regional tax competition on the feasibility of a harmonized tax system, its effects on attracting economic activities across regions, and the role of industrial agglomeration in determining regional resilience to economic shocks. Employing advanced econometric methods on disaggregated regional and firm-level data, this study demonstrates how fiscal decentralization generates heterogeneous policy outcomes. The analysis reveals that tax competition significantly reduces the feasibility of tax harmonization while exhibiting limited effectiveness in attracting economic activities. Furthermore, industrial agglomeration produces divergent resilience patterns, enhancing stability in rural regions but amplifying economic volatility in urban centers. These results indicate that policy interventions require careful differentiation based on a region's position along the urban-rural continuum.