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East Germany: Transition with Unification ; Experiments and Experiences

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  • von Hagen, Jürgen
  • Strauch, Rolf R.
  • Wolff, Guntram B.

Abstract

East Germany remains unique among the transition economies. Soon after the fall of the Berlin Wall in 1989, it became part of the Federal Republic of Germany. German Union meant the transplantation of West Germany's legal, administrative and economic infrastructure to the five new Länder. The paper traces the economic changes since 1989 and assesses the convergence between West and East Germany during the last decade. We reach three main conclusions: First, there has been significant convergence in the administrative and economic realm, though persistent differences remain in the level of output and incomes as well as local capacities. Third, the Kohl government's policy towards East German transition, driven by short-term electoral considerations, has focused almost entirely on financing a high standard of consumption and too little on fostering investment and economic restructuring. Third, there is, therefore, a considerable risk that East Germany will remain a transfer-dependent economy for the foreseeable future. However, endogenous institutional change in the labour market, showing its first signs in East Germany, may become important in overcoming the structural problems in the new Länder.

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Bibliographic Info

Paper provided by ZEI - Center for European Integration Studies, University of Bonn in its series ZEI Working Papers with number B 19-2002.

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Date of creation: 2002
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Handle: RePEc:zbw:zeiwps:b192002

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Keywords: Economic transition; public finance;

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References

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  1. Hans-Werner Sinn, 2000. "EU Enlargement, Migration, and Lessons from German Unification," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 299-314, 08.
  2. Sinn, Hans-Werner, 1995. "Factor Price Distortions and Public Subsidies in East Germany," CEPR Discussion Papers 1155, C.E.P.R. Discussion Papers.
  3. Wolfram Kempe & Hilmar Schneider & Gabriele Hardt, 2001. "Ost-West-Wanderung junger Menschen Ausdruck für allgemeinen Anstieg der Mobilität," Wirtschaft im Wandel, Halle Institute for Economic Research, vol. 7(4), pages 67-74.
  4. Wolfgang Nierhaus, 1999. "Höhere Rentenanpassung in Ostdeutschland erforderlich?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 52(19), pages 20-24, October.
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Cited by:
  1. Block, Joern & Wagner, Marcus, 2006. "Necessity and Opportunity Entrepreneurs in Germany: Characteristics and Earnings Differentials," MPRA Paper 610, University Library of Munich, Germany.
  2. Jörn Block & Philipp Sandner, 2009. "Necessity and Opportunity Entrepreneurs and Their Duration in Self-employment: Evidence from German Micro Data," Journal of Industry, Competition and Trade, Springer, vol. 9(2), pages 117-137, June.
  3. Jarko Fidrmuc & Jan Fidrmuc, 2001. "Disintegration and Trade," LICOS Discussion Papers 9901, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  4. Block, Joern & Sandner, Philipp, 2006. "The Effect of Motivation on Self-Employment Duration in Germany: Necessity versus Opportunity Entrepreneurs," MPRA Paper 215, University Library of Munich, Germany.

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