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Blood, Sweat, and Tears: The Rise and Decline of the East German Economy, 1949-1988

  • Ulrich Blum


    (Technische Universität Dresden)

  • Leonard Dudley


    (Universite de Montreal)

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.

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Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

Volume (Year): 220 (2000)
Issue (Month): 4 ()
Pages: 438-452

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Handle: RePEc:jns:jbstat:v:220:y:2000:i:4:p:438-452
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