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Analysis of convergence process of East German economy on the base of a two-region growth model

Author

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  • Kilin F.S.

    (Chemnitz University, Germany)

Abstract

The main purpose of the paper is to analyse the speed of regional convergence of unified Germany on the basis of a two-region growth model with public productive spending. The model explains the dynamics of convergence, taking into account high fixed wages in East Germany, recent dynamics of public productive spending, government subsidies for private investments and a structure of human capital in both parts of Germany. The paper detects a new possible cause of the recent halt of East German economic convergence, namely the influence of pre- unification educational infrastructure dynamics. Using the model, we estimate numerically different reform strategies, which have the goal to increase the speed of convergence.

Suggested Citation

  • Kilin F.S., 2003. "Analysis of convergence process of East German economy on the base of a two-region growth model," GE, Growth, Math methods 0304002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpge:0304002
    Note: Type of Document - Acrobat PDF; prepared on Windows NT; to print on HP; pages: 20 ; figures: included
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    References listed on IDEAS

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    1. Erich Gundlach, 2003. "Growth Effects of EU Membership: The Case of East Germany," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(3), pages 237-270, September.
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    7. Henning Klodt, 2000. "Industrial Policy and the East German Productivity Puzzle," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 315-333, August.
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    9. Funke Michael & Strulik Holger, 2000. "Growth and Convergence in a Two-Region Model of Unified Germany," German Economic Review, De Gruyter, vol. 1(3), pages 363-384, August.
    10. Gerling, Katja, 2000. "Subsidization and Structural Change in Eastern German Transition: Did Economic Policy Meet Its Objectives?," Kiel Working Papers 998, Kiel Institute for the World Economy (IfW Kiel).
    11. Frank Siebern, 2000. "Growth and Convergence in a Two‐Region Model of Unified Germany," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 363-384, August.
    12. Sinn, Hans-Werner, 2002. "Germany's Economic Unification: An Assessment after Ten Years," Review of International Economics, Wiley Blackwell, vol. 10(1), pages 113-128, February.
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    More about this item

    Keywords

    East Germany Ostdeutschland convergence fixed wages education two-region growth human capital collateral unemployment infrastructure traffic trade union subsidies employers organisation;

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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