An Economic Life in Vain − Path Dependence and East Germanyâs Pre- and Post-Unification Economic Stagnation
Abstract20 years after unification, the East German twin’s economic position is relatively stagnant compared to most of the West German productivity and income variables. The strong initial takeoff until the mid-end 1990s ended at a level of 70% to 80% of the western reference. In this paper, two interdependent hypotheses are put to the test: (i) that the communist economy prior to unification was on a stagnating path contrary to what standard analyses show; (ii) that strong elements of path dependence exist and that the switch from plan to market offset the pre-unification stagnation but was not able to repair structural deficits inherited from the past. In fact, looking into West German long-term data, an extremely stable development path can be found that extends from the 19th century to the present. Thus, the analysis of the East German development path is both economically relevant and politically interesting if economic policies are to be formulated.
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Bibliographic InfoPaper provided by Halle Institute for Economic Research in its series IWH Discussion Papers with number 10.
Date of creation: Jul 2011
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East Germany; time series; income; institution; product; unification; economic growth; convergence;
Find related papers by JEL classification:
- N0 - Economic History - - General
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
- P2 - Economic Systems - - Socialist Systems and Transition Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-02 (All new papers)
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