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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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Suggested Citation

  • von Hagen, Jürgen & Strauch, Rolf R. & Wolff, Guntram B., 2002. "East Germany: Transition with Unification ; Experiments and Experiences," ZEI Working Papers B 19-2002, University of Bonn, ZEI - Center for European Integration Studies.
    • Handle: RePEc:zbw:zeiwps:b192002
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    References listed on IDEAS

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    1. Boss, Alfred, 1998. "How Germany shouldered the fiscal burden of the unification," Kiel Working Papers 851, Kiel Institute for the World Economy (IfW Kiel).
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    Cited by:

    1. Bergemann, Annette & Pohlan, Laura & Uhlendorff, Arne, 2017. "The impact of participation in job creation schemes in turbulent times," Labour Economics, Elsevier, vol. 47(C), pages 182-201.
    2. Joern H. Block & Marcus Wagner, 2010. "Necessity and Opportunity Entrepreneurs in Germany: Characteristics and Earning s Differentials," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 62(2), pages 154-174, April.
    3. 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.
    4. Jan Fidrmuc & Jarko Fidrmuc, 2003. "Disintegration and Trade," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 811-829, November.
    5. Page, William, 2003. "Germany's Mezzogiorno revisited: Institutions, fiscal transfers and regional convergence," Research Notes 9, Deutsche Bank Research.
    6. Juan Carlos Martinez Oliva, 2009. "Riunificazione intertedesca e politiche per la convergenza," Mo.Fi.R. Working Papers 14, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    7. 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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    More about this item

    Keywords

    Economic transition; public finance;

    JEL classification:

    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects

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