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Cyclical Adjustment, Capital-labor Substitution and Total Factor Productivity Convergence – East Germany After Unification

  • Smolny Werner

    ()

    (Ludwig Erhard Chair, Faculty of Mathematics and Economics, Institute of Economic Policy, University of Ulm, 89069 Ulm, Germany)

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    Despite rapid economic integration and massive help from the Federal Government East German productivity catching up faded out in the nineties. This paper presents panel-data estimates of the productivity adjustment based on a production function framework and a stylized adjustment model of the economy. The central empirical result is a decomposition of the sources of productivity growth. The estimates reveal that a large part of productivity growth in the early nineties is related to factors that were specific for that period. The fading out since the mid-nineties is attributed to the development of total factor productivity.

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    Article provided by De Gruyter in its journal Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik).

    Volume (Year): 232 (2012)
    Issue (Month): 4 (August)
    Pages: 445-459

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    Handle: RePEc:jns:jbstat:v:232:y:2012:i:4:p:445-459
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    1. Jennifer Hunt, 2001. "Post-Unification Wage Growth in East Germany," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 190-195, February.
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    14. Rudiger Dornbusch & Holger Wolf, 1992. "Economic Transition in Eastern Germany," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 235-272.
    15. Smolny, Werner, 2010. "Dynamic adjustment and long-run equilibria: Panel data estimates for the East German states," Economic Modelling, Elsevier, vol. 27(5), pages 1223-1229, September.
    16. Claudia Buch & Farid Toubal, 2009. "Openness and Growth: The Long Shadow of the Berlin Wall," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00311570, HAL.
    17. Henning Klodt, 2000. "Industrial Policy and the East German Productivity Puzzle," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 315-333, 08.
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