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Blood, Sweat, and Tears: The Rise and Decline of the East German Economy, 1949–1988 / Blut, Schweiß, Tränen: Aufstieg und Niedergang der ostdeutschen Wirtschaft, 1949–1988

Author

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  • Blum Ulrich

    () (Wirtschaftswissenschaftliche Fakultät, Technische Universität Dresden, D-01062 Dresden)

  • Dudley Leonard

    () (CRDE and Economics Department, Universite de Montreal, Montreal, QC, H3C 3J7 Canada)

Abstract

The rise of the East-German economy in the 1950s and 1960s and its decline in the 1970s and 1980s is difficult to explain by neoclassical economics. However; the observed life cycle may be explained by the inclusion of concepts from old and new institutional economics and from functional economics. Three distinct periods may be identified. During the “blood” period of forced development and autocratic rule, the information system and the system of property rights were roughly compatible with the economic structure. Then, in the “sweat” period, an attempt to overtake the capitalistic societies failed. Finally, in the “tears” period, economic decline could only be disguised by unsustainable inflows of foreign capital. This institutional explanation of the East-German collapse is tested with data for the period 1949-1988 and cannot be rejected.

Suggested Citation

  • Blum Ulrich & Dudley Leonard, 2000. "Blood, Sweat, and Tears: The Rise and Decline of the East German Economy, 1949–1988 / Blut, Schweiß, Tränen: Aufstieg und Niedergang der ostdeutschen Wirtschaft, 1949–1988," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 220(4), pages 438-452, August.
  • Handle: RePEc:jns:jbstat:v:220:y:2000:i:4:p:438-452
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
    3. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    4. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
    5. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    6. Ulrich Blum & Leonard Dudley, 1999. "The Two Germanies: Information Technology and Economic Divergence, 1949-1989," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(4), pages 710-710, December.
    7. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Cited by:

    1. Blum, Ulrich, 2011. "An Economic Life in Vain − Path Dependence and East Germany’s Pre- and Post-Unification Economic Stagnation," IWH Discussion Papers 10/2011, Halle Institute for Economic Research (IWH).

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