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From Socialist Showcase to Mezzogiorno? Lessons on the Role of Technical Change from East Germany's Post-World War II Growth Performance

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  • Wolfgang Keller

    (University of Wisconsin and NBER)

Abstract

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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Bibliographic Info

Paper provided by EconWPA in its series Development and Comp Systems with number 9707002.

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Length: 28 pages
Date of creation: 07 Jul 1997
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Handle: RePEc:wpa:wuwpdc:9707002

Note: Type of Document - Latex (Scientific Word 2.0); prepared on PC; to print on HP/PostScript; pages: 28 ; figures: also downloadable from here, in a separate file
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Related research

Keywords: Catch-up and convergence; Solow growth model; identification of differences in the rate of technical change;

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Citations

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Cited by:
  1. Falko Juessen, 2009. "A distribution dynamics approach to regional GDP convergence in unified Germany," Empirical Economics, Springer, vol. 37(3), pages 627-652, December.
  2. Peri, Giovanni & Urban, Dieter, 2006. "Catching-up to foreign technology? Evidence on the "Veblen-Gerschenkron" effect of foreign investments," Regional Science and Urban Economics, Elsevier, vol. 36(1), pages 72-98, January.
  3. Ray Barrell & Dirk Willem te Velde, 2000. "Catching-up of East German Labour Productivity in the 1990s," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 271-297, 08.
  4. Hans-Werner Sinn, 2000. "Germany's Economic Unification: An Assessment after Ten Years," NBER Working Papers 7586, National Bureau of Economic Research, Inc.
  5. Marcus Noland & Sherman Robinson & Tao Wang, 1999. "Modeling Korean Unification," Working Paper Series WP99-7, Peterson Institute for International Economics.
  6. Frank Siebern, 2000. "Better LATE? Instrumental Variables Estimation of the Returns to Job Mobility during Transition," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 335-362, 08.
  7. Giovanni Peri & Dieter Urban, 2002. "The Veblen-Gerschenkron Effect of FDI in Mezzogiorno and East Germany," Development Working Papers 164, Centro Studi Luca d\'Agliano, University of Milano.
  8. Falko Juessen, 2005. "A distribution dynamics approach to regional income convergence in reunified Germany," ERSA conference papers ersa05p411, European Regional Science Association.

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