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From socialist showcase to Mezzogiorno? Lessons on the role of technical change from East Germany's post-World War II growth performance

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  • Keller, Wolfgang

Abstract

In this paper we emphasize the contribution of technical change, broadly defined, towards productivity growth in explaining the relative East Germany-West Germany performance during the post-World War II era. We argue that previous work was excessively focused on physical capital investments determining productivity differentials, which consequently led to an overestimation of the East German performance during the Socialist era, and an overly pessimistic assessment of the East German prospects of catching up with West Germany during the post-reunification era. We show, first, that the rates of technical change in the manufacturing industries of East German states were significantly below those in Western states, helping to account for the fact that East Germany was not the socialist showcase for which it was frequently taken before German reunification. Second, we demonstrate that the rates of technical change in the East German states have been considerably higher than those in the West since German reunification. This suggests that the Mezzogiorno prediction for East Germany--that it will stay persistently behind West Germany as does Italy's South relative to its North--, based on an analysis of the need for physical capital accumulation alone, will prove too pessimistic.

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 63 (2000)
Issue (Month): 2 (December)
Pages: 485-514

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Handle: RePEc:eee:deveco:v:63:y:2000:i:2:p:485-514

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  1. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
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Cited by:
  1. Hans-Werner Sinn, 2000. "Germany's Economic Unification. An Assessment after Ten Years," CESifo Working Paper Series 247, CESifo Group Munich.
  2. Juessen, Falko, 2009. "A Distribution Dynamics Approach to Regional GDP Convergence in Unified Germany," IZA Discussion Papers 4177, Institute for the Study of Labor (IZA).
  3. Falko Juessen, 2005. "A distribution dynamics approach to regional income convergence in reunified Germany," ERSA conference papers ersa05p411, European Regional Science Association.
  4. Giovanni Peri, 2004. "Catching-Up to Foreign Technology? Evidence on the "Veblen-Gerschenkron" Effect of Foreign Investments," NBER Working Papers 10893, National Bureau of Economic Research, Inc.
  5. Marcus Noland & Sherman Robinson & Tao Wang, 1999. "Modeling Korean Unification," Working Paper Series WP99-7, Peterson Institute for International Economics.
  6. Ray Barrell & Dirk Willem te Velde, 2000. "Catching-up of East German Labour Productivity in the 1990s," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 271-297, 08.
  7. Frank Siebern, 2000. "Better LATE? Instrumental Variables Estimation of the Returns to Job Mobility during Transition," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 335-362, 08.
  8. Giovanni Peri & Dieter Urban, 2002. "The Veblen-Gerschenkron Effect of FDI in Mezzogiorno and East Germany," Development Working Papers 164, Centro Studi Luca d\'Agliano, University of Milano.

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