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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)

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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Bibliographic Info

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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Web page: http://128.118.178.162

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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References

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  1. 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, 08.
  2. 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.
  3. Hans-Werner Sinn, 2000. "Germany's Economic Unification: An Assessment after Ten Years," NBER Working Papers 7586, National Bureau of Economic Research, Inc.
  4. 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.
  5. Katja Gerling, 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.
  6. 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.
  7. Mary Finn, 1993. "Is all government capital productive?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 53-80.
  8. Erich Gundlach, 2003. "Growth Effects of EU Membership: The Case of East Germany," Empirica, Springer, vol. 30(3), pages 237-270, September.
  9. Karl Brenke & Alexander Eickelpasch & Dieter Vesper, 2002. "Fortschritte beim Aufbau Ost: Fortschrittsbericht über die wirtschaftliche Entwicklung in Ostdeutschland," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 69(25), pages 393-416.
  10. Henning Klodt, 2000. "Industrial Policy and the East German Productivity Puzzle," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 315-333, 08.
  11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  12. Michael Funke & Holge Strulik, 1999. "Growth and Convergence in a Two-Region Model of Unified Germany," CESifo Working Paper Series 206, CESifo Group Munich.
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