IDEAS home Printed from https://ideas.repec.org/a/bpj/germec/v1y2000i3p363-384.html

Growth and Convergence in a Two-Region Model of Unified Germany

Author

Listed:
  • Funke Michael

    (Hamburg University,Hamburg, Germany)

  • Strulik Holger

    (Hamburg University,Hamburg, Germany)

Abstract

The paper sets up a two-region endogenous growth model to discuss growth and regional convergence of unified Germany. It emphasizes the role of private and public capital accumulation during the developing process. The theoretical part derives fiscal policy rules which establish convergence of regional output per capita and convergence of regional human wealth. To assess the speed of convergence the model is calibrated with German data. Given a fiscal policy rule that is consistent with the data on government spending in East and West Germany after unification the model suggests that East Germany will reach 80 per cent of West Germany's income per capita between 20 and 30 years after unification and that actual transfers are approximately sufficient to equalize regional human wealth. The results are compared with an extension of the model that includes wage-setting behaviour and unemployment in the eastern region.

Suggested Citation

  • Funke Michael & Strulik Holger, 2000. "Growth and Convergence in a Two-Region Model of Unified Germany," German Economic Review, De Gruyter, vol. 1(3), pages 363-384, August.
    • Handle: RePEc:bpj:germec:v:1:y:2000:i:3:p:363-384
    DOI: 10.1111/1468-0475.00018
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1468-0475.00018
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1111/1468-0475.00018?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andreas Schäfer & Thomas Steger, 2014. "Journey into the Unknown? Economic Consequences of Factor Market Integration under Increasing Returns to Scale," Review of International Economics, Wiley Blackwell, vol. 22(4), pages 783-807, September.
    2. Erich Gundlach, 2003. "Growth Effects of EU Membership: The Case of East Germany," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(3), pages 237-270, September.
    3. Falko Juessen, 2009. "A distribution dynamics approach to regional GDP convergence in unified Germany," Empirical Economics, Springer, vol. 37(3), pages 627-652, December.
    4. Yvonne Schindele, 2010. "How Long Does it Take to Become an Entrepreneurial Society - The Case of German Convergence in Self-Employment," Jena Economics Research Papers 2010-015, Friedrich-Schiller-University Jena.
    5. Bonin, Holger, 2005. "Tarifpolitik, Entgeltflexibilität und Beschäftigung in Ostdeutschland (Colletive bargaining policy, wage flexibility and employment in eastern Germany)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(2/3), pages 165-179.
    6. Reinhold Kosfeld & Hans-Friedrich Eckey & Christian Dreger, 2006. "Regional productivity and income convergence in the unified Germany, 1992-2000," Regional Studies, Taylor & Francis Journals, vol. 40(7), pages 755-767.
    7. Sebastian Vollmer & Hajo Holzmann & Florian Ketterer & Stephan Klasen, 2013. "Distribution dynamics of regional GDP per employee in unified Germany," Empirical Economics, Springer, vol. 44(2), pages 491-509, April.
    8. Michael Funke & Jörg Rahn, 2002. "How efficient is the East German economy? An exploration with microdata," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 10(1), pages 201-223.
    9. Hans-Friedrich Eckey & Reinhold Kosfeld & Matthias Türck, 2007. "Regional Convergence in Germany: a Geographically Weighted Regression Approach," Spatial Economic Analysis, Taylor & Francis Journals, vol. 2(1), pages 45-64.
    10. Andreas Schäfer & Thomas Steger, 2010. "History, Expectations, and Public Policy: Economic Development in Eastern Germany," CESifo Working Paper Series 3184, CESifo.
    11. Falko Juessen, 2005. "A distribution dynamics approach to regional income convergence in reunified Germany," ERSA conference papers ersa05p411, European Regional Science Association.
    12. Böhm, Sebastian, 2015. "Regional economic integration and factor mobility in unified Germany," FSES Working Papers 463, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    13. Volker Grossmann & Thomas Steger, 2013. "Konvergieren die Einkommen zwischen Ost- und Westdeutschland? Das deutsch-deutsche Experiment aus wachstumsökonomischer Sicht," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 20(02), pages 29-32, April.
    14. Stephen Dobson & Carlyn Ramlogan & Eric Strobl, 2006. "Why Do Rates Of Β‐Convergence Differ? A Meta‐Regression Analysis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(2), pages 153-173, May.
    15. Bernd Aumann & Rolf Scheufele, 2010. "Is East Germany catching up? A time series perspective," Post-Communist Economies, Taylor & Francis Journals, vol. 22(2), pages 177-192.
    16. Ferrentino, Rosa & Vota, Luca, 2024. "The development planning of the Italian Mezzogiorno: A statistical-mathematical analysis by a Real Business Cycle model," Socio-Economic Planning Sciences, Elsevier, vol. 96(C).
    17. Funke, Michael & Strulik, Holger, 2005. "Growth and convergence in a two-region model: The hypothetical case of Korean unification," Journal of Asian Economics, Elsevier, vol. 16(2), pages 255-279, April.
    18. Herrmann Marco, 2002. "Zur empirischen Suche nach einer effizienten Investitionsquote für Ostdeutschland / About the Empirical Search for an Efficient Ratio of Investment to GDP for East Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 222(6), pages 683-705, December.
    19. Kilin F.S., 2003. "Analysis of convergence process of East German economy on the base of a two-region growth model," GE, Growth, Math methods 0304002, University Library of Munich, Germany.
    20. Gießler Stefan & Heinisch Katja & Holtemöller Oliver, 2021. "(Since When) Are East and West German Business Cycles Synchronised?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 241(1), pages 1-28, February.
    21. Cieślik, Andrzej & Misiak, Tomasz, 2025. "A fragmented country: Regional income convergence in Germany," Structural Change and Economic Dynamics, Elsevier, vol. 75(C), pages 248-260.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:germec:v:1:y:2000:i:3:p:363-384. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyterbrill.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.