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

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Author Info
Kilin F.S. (Chemnitz University, Germany)

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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.

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Paper provided by EconWPA in its series GE, Growth, Math methods with number 0304002.

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Length: 20 pages
Date of creation: 26 Apr 2003
Date of revision:
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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Related research
Keywords: East Germany Ostdeutschland convergence fixed wages education two-region growth human capital collateral unemployment infrastructure traffic trade union subsidies employers organisation;

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Find related papers by JEL classification:
C6 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming
D5 - Microeconomics - - General Equilibrium and Disequilibrium
D9 - Microeconomics - - Intertemporal Choice and Growth

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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.:
  1. Mary Finn, 1993. "Is all government capital productive?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 53-80. [Downloadable!]
  2. Karl Brenke & Alexander Eickelpasch & Dieter Vesper, 2002. "Fortschritte beim Aufbau Ost: Fortschrittsbericht über die wirtschaftliche Entwicklung in Ostdeutschland," Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 69(25), pages 393-416.
  3. Erich Gundlach, 2003. "Growth Effects of EU Membership: The Case of East Germany," Empirica, Springer, vol. 30(3), pages 237-270, September. [Downloadable!] (restricted)
  4. Henning Klodt, 2000. "Industrial Policy and the East German Productivity Puzzle," German Economic Review, Blackwell Publishing, vol. 1(3), pages 315-333, 08. [Downloadable!] (restricted)
  5. Hans-Werner Sinn, 1995. "Staggering along: wages policy and investment support in East Germany," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 3(4), pages 403-426, December. [Downloadable!] (restricted)
  6. Frank Siebern, 2000. "Growth and Convergence in a Two-Region Model of Unified Germany," German Economic Review, Blackwell Publishing, vol. 1(3), pages 363-384, 08. [Downloadable!] (restricted)
  7. Sinn, Hans-Werner, 2002. "Germany's Economic Unification: An Assessment after Ten Years," Review of International Economics, Blackwell Publishing, vol. 10(1), pages 113-28, February. [Downloadable!] (restricted)
    Other versions:
  8. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October. [Downloadable!] (restricted)
    Other versions:
  9. Funke, M. & Strulik, H., 1999. "Growth and Convergence in a Two-Region Model of Unified Germany," Electronic-Only (EO) Working Papers 9905, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  10. Ono, Yoshiyasu & Shibata, Akihisa, 1992. "Spill-over effects of supply-side changes in a two-country economy with capital accumulation," Journal of International Economics, Elsevier, vol. 33(1-2), pages 127-146, August. [Downloadable!] (restricted)
    Other versions:
  11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. [Downloadable!] (restricted)
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