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Is East Germany Catching Up? A Time Series Perspective

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  • Bernd Aumann
  • Rolf Scheufele

Abstract

This paper assesses whether the economy of East Germany is catching up with the West German region in terms of welfare. While the primary measure for convergence and catching up is per capita output, we also look at other macroeconomic indicators such as unemployment rates, wage rates, and production levels in the manufacturingsector. In contrast to existing studies of convergence between regions of reunified Germany, our approach is purely based upon the time series dimension and is thus directly focused on the catching up process in East Germany as a region. Our testing setup includes standard ADF unit root tests as well as unit root tests that endogenously allow for a break in the deterministic component of the process. In our analysis, we find evidence of catching up for East Germany for most of the indicators. However, convergence speed is slow, and thus it can be expected that the catching up process will take further decades until the regional gap is closed.

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Bibliographic Info

Paper provided by Halle Institute for Economic Research in its series IWH Discussion Papers with number 14.

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Date of creation: Aug 2009
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Handle: RePEc:iwh:dispap:14-09

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Keywords: east germany; catching up; convergence; unit root tests;

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Cited by:
  1. Frank Scharr, 2009. "Aufbau Ost 20 Jahre nach dem Mauerfall: Ziele und Aufgaben für die nächsten Jahre," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 62(18), pages 43-48, 09.
  2. Peter Mihalyi, 2012. "The Causes of Slow Growth in Hungary during the Post-Communist Transformation Period," IEHAS Discussion Papers 1216, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.

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