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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
6079.
Length: Date of creation: Jul 1997 Date of revision: Handle: RePEc:nbr:nberwo:6079
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Find related papers by JEL classification: O3 - Economic Development, Technological Change, and Growth - - Technological Change O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
References listed on IDEAS 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.:
Barro, Robert J & Sala-i-Martin, Xavier, 1992.
"Convergence,"
Journal of Political Economy,
University of Chicago Press, vol. 100(2), pages 223-51, April.
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