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The slow decline of East Germany

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  • Uhlig, Harald

Abstract

Fifteen years after German reunification, the facts about slow regional convergence have born out the prediction of Barro [Barro, Robert J., 1991. Eastern Germany's long haul. The Wall Street Journal, Dow Jones and Company, May 3], except that migration out of East Germany has not slowed down. I document that in particular the 18-29 year old are leaving East Germany, and that the emigration has accelerated in recent years. I document that low wages, high unemployment and increasing reliance on social security persist across wide regions of East Germany together with these migration patterns. To understand these patterns, I use an extension of the standard labor search model introduced in Uhlig [Uhlig, Harald, 2006. Regional labor markets, network externalities and migration: The case of German reunification. American Economic Review, Papers and Proceedings 96 (2), 383-387; Uhlig, Harald, 2008. A labor-search model of regional unemployment and migration. Draft, University of Chicago] by allowing for migration and network externalities. In that theory, two equilibria can result: one with a high networking rate, high average labor productivity, low unemployment and no emigration ("West Germany") and one with a low networking rate, low average labor productivity, high unemployment and a constant rate of emigration ("East Germany"). The model does not imply any obviously sound policies to move from the weakly networked equilibrium to the highly networked equilibrium. Journal of Comparative Economics 36 (4) (2008) 517-541.

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Bibliographic Info

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

Volume (Year): 36 (2008)
Issue (Month): 4 (December)
Pages: 517-541

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Handle: RePEc:eee:jcecon:v:36:y:2008:i:4:p:517-541

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Web page: http://www.elsevier.com/locate/inca/622864

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Keywords: German reunification Labor market search Network externalities Migration Regional economics;

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Cited by:
  1. Sebastian Vollmer & Hajo Holzmann & Florian Ketterer & Stephan Klasen, 2013. "Distribution dynamics of regional GDP per employee in unified Germany," Empirical Economics, Springer, vol. 44(2), pages 491-509, April.
  2. Julia Jauer & Thomas Liebig & John P. Martin & Patrick A. Puhani, 2014. "Migration as an adjustment mechanism in the crisis? A comparison of Europe and the United States," CReAM Discussion Paper Series 1410, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  3. van Hoorn, André & Maseland, Robbert, 2010. "Cultural differences between East and West Germany after 1991: Communist values versus economic performance?," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 791-804, December.
  4. Julia Spies, 2009. "Network and Border Effects: Where Do Foreign Multinationals Locate in Germany?," IAW Discussion Papers 47, Institut für Angewandte Wirtschaftsforschung (IAW).
  5. Zier, Patrick, 2013. "Econometric impact assessment of the Common Agricultural Policy in East German agriculture," Studies on the Agricultural and Food Sector in Central and Eastern Europe, Leib­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO), volume 71, number 71.
  6. Petrick, Martin & Zier, Patrick, 2012. "Common Agricultural Policy effects on dynamic labour use in agriculture," Structural Change in Agriculture/Strukturwandel im Agrarsektor (SiAg) Working Papers 134425, Humboldt University Berlin, Department of Agricultural Economics.
  7. Petrick, Martin & Zier, Patrick, 2010. "Cap Impacts On Labour Use In East German Agriculture," 50st Annual Conference, Braunschweig, Germany, September 29-October 1, 2010 93962, German Association of Agricultural Economists (GEWISOLA).
  8. Benjamin Wirth, 2013. "Ranking German regions using interregional migration - What does internal migration tells us about regional well-being?," ERSA conference papers ersa13p1254, European Regional Science Association.

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