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The Costs of Remoteness: Evidence from German Division and Reunification

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Author Info
Stephen Redding
Daniel M. Sturm

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Abstract

This paper exploits the division of Germany after the Second World War and thereunification of East and West Germany in 1990 as a natural experiment to provide evidenceof the importance of market access for economic development. In line with a standard neweconomic geography model, we find that following division cities in West Germany that wereclose to the new border between East and West Germany experienced a substantial decline inpopulation growth relative to other West German cities. We provide several pieces ofevidence that the decline of the border cities can be entirely accounted for by their loss inmarket access and is neither driven by differences in industrial structure nor differences in thedegree of warrelated destruction. Finally, we also find some first evidence of a recovery ofthe border cities after the re-unification of East and West Germany.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0688.

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Date of creation: May 2005
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Handle: RePEc:cep:cepdps:dp0688

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Keywords: Market Access Economic Geography German Division German Reunification

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Find related papers by JEL classification:
F15 - International Economics - - Trade - - - Economic Integration
N94 - Economic History - - Regional and Urban History - - - Europe: 1913-
O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Regional, Urban, and Rural Analyses

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Redding, Stephen J & Sturm, Daniel M & Wolf, Nikolaus, 2007. "History and Industry Location: Evidence from German Airports," CEPR Discussion Papers 6345, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Maarten Bosker & Steven Brakman & Harry Garretsen & Marc Schramm, 2006. "A Century of Shocks: The Evolution of the German City Size Distribution 1925 – 1999," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  3. Nicola Fuchs-Schündeln & Rima Izem, 2007. "Explaining the Low Labor Productivity in East Germany. A Spatial Analysis," Kiel Working Papers 1307, Kiel Institute for the World Economy. [Downloadable!]
  4. Claudia M. Buch & Farid Toubal, 2007. "Openness and Growth: The Long Shadow of the Berlin Wall," IAW Discussion Papers 31, Institut für Angewandte Wirtschaftsforschung (IAW). [Downloadable!]
  5. Maarten Bosker & Steven Brakman & Harry Garretsen & Marc Schramm, 2005. "Looking for Multiple Equilibria when Geography Matters: German City Growth and the WWII Shock," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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