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The Costs of Remoteness: Evidence from German Division and Reunification

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  • Stephen J. Redding
  • Daniel M. Sturm

Abstract

This paper exploits the division of Germany after the Second World War and the reunification of East and West Germany in 1990 as a natural experiment to provide evidence for the importance of market access for economic development. In line with a standard new economic geography model, we find that, following division, cities in West Germany close to the East-West German border experienced a substantial decline in population growth relative to other West German cities. We show that the model can account for the quantitative magnitude of our findings and provide additional evidence against alternative possible explanations. (JEL F15, N94, R12, R23)

Suggested Citation

  • Stephen J. Redding & Daniel M. Sturm, 2008. "The Costs of Remoteness: Evidence from German Division and Reunification," American Economic Review, American Economic Association, vol. 98(5), pages 1766-1797, December.
  • Handle: RePEc:aea:aecrev:v:98:y:2008:i:5:p:1766-97
    Note: DOI: 10.1257/aer.98.5.1766
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • N94 - Economic History - - Regional and Urban History - - - Europe: 1913-
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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