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Wasted advantages: a note on the 20th anniversary of German unification

Author

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  • Gerlinde Sinn
  • Hans-Werner Sinn

Abstract

After 20 years of German unification, Gerlinde and Hans-Werner Sinn draw up a balance on what has been achieved. The primacy of politics over the laws of economics led to foreseeable problems in unification policies. A strong convergence between eastern and western Germany is today only apparent in real incomes, which are composed of earned income and government transfers. This is the result of the transfer union that was established. Still today the annual net transfers to the new federal states amount to about 60 billion euros, of which half flows out of the new federal states as net capital exports since the locational conditions there are not conducive to investing the money on site. The main reason for this sorry state of affairs lies in the initial mistakes of wage policy that led to a too rapid wage convergence.

Suggested Citation

  • Gerlinde Sinn & Hans-Werner Sinn, 2010. "Wasted advantages: a note on the 20th anniversary of German unification," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 63(19), pages 10-11, October.
    • Handle: RePEc:ces:ifosdt:v:63:y:2010:i:19:p:10-11
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    File URL: https://www.ifo.de/DocDL/ifosd_2010_19_2.pdf
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    Cited by:

    1. Michael Berlemann & Jan-Erik Wesselhöft, 2012. "Total Factor Productivity in German Regions," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(02), pages 58-65, July.
    2. Michael Berlemann & Jan-Erik Wesselhöft, 2012. "Total Factor Productivity in German Regions," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(2), pages 58-65, July.

    More about this item

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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