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Neoclassical versus Keynesian approaches to Eastern German unemployment: a rejoinder to Merkl and Snower

Author

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  • John Hall
  • Udo Ludwig

Abstract

This rejoinder contrasts a Keynesian approach for explaining unemployment in Germany's eastern region with a neoclassical, market-failure approach advanced by Christian Merkl and Dennis Snower. A skewed distribution of headquarters favoring the western region, combined with insufficient levels of effective demand for outputâand subsequently for laborâare argued to be the key causes of persistent unemployment. Seven tables offer a comparative approach to output, investment, and labor demand in Germany's eastern and western regions, noting the emergence and persistence of "involuntary" unemployment appearing as a jobs' gap in the eastern region, especially for services.

Suggested Citation

  • John Hall & Udo Ludwig, 2008. "Neoclassical versus Keynesian approaches to Eastern German unemployment: a rejoinder to Merkl and Snower," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 31(1), pages 167-185, September.
  • Handle: RePEc:mes:postke:v:31:y:2008:i:1:p:167-185
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    References listed on IDEAS

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    1. Lechthaler, Wolfgang & Merkl, Christian & Snower, Dennis J., 2010. "Monetary persistence and the labor market: A new perspective," Journal of Economic Dynamics and Control, Elsevier, vol. 34(5), pages 968-983, May.
    2. Michael C. Burda & Wolfgang Härdle & Marlene Müller & Axel Werwatz, 1998. "Semiparametric analysis of German East-West migration intentions: facts and theory," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(5), pages 525-541.
    3. John Hall & Udo Ludwig, 2007. "Explaining persistent unemployment in eastern Germany," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(4), pages 601-619.
    4. Hans-Werner Sinn, 1995. "Staggering along: wages policy and investment support in East Germany," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 3(4), pages 403-426, December.
    5. Burda, Michael C., 1993. "The determinants of East-West German migration: Some first results," European Economic Review, Elsevier, vol. 37(2-3), pages 452-461, April.
    6. Lehmann, Harald & Ludwig, Udo & Ragnitz, Joachim, 2005. "Originäre Wirtschaftskraft der neuen Länder noch schwächer als bislang angenommen," Wirtschaft im Wandel, Halle Institute for Economic Research (IWH), vol. 11(5), pages 134-145.
    7. Dennis J. Snower & Christian Merkl, 2006. "The Caring Hand that Cripples: The East German Labor Market after Reunification," American Economic Review, American Economic Association, pages 375-382.
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