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Distribution dynamics of regional GDP per employee in unified Germany

  • Sebastian Vollmer

    ()

  • Hajo Holzmann
  • Florian Ketterer
  • Stephan Klasen

We investigate to what extent convergence in production levels per worker has been achieved in Germany since unification. To this end, we model the distribution of GDP per employee across German districts using two-component normal mixtures. While in the first year after unification, the two-component distributions were clearly separated and bimodal, corresponding to the East and West German districts, respectively, in the following years they started to merge showing only one mode. Still, using the recently developed EM-test for homogeneity in normal mixtures, the hypothesis of just a single normal component for the whole distribution is clearly rejected for all years. A Posterior analysis shows that about a third of the East German districts were assigned to the richer component in 2006, thus catching up to levels of the West. The growth rate of a mover district is about 1% point higher than the growth rate of a non-mover district which had the same initial level of GDP per employee. Copyright The Author(s) 2013

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File URL: http://hdl.handle.net/10.1007/s00181-011-0543-3
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Article provided by Springer in its journal Empirical Economics.

Volume (Year): 44 (2013)
Issue (Month): 2 (April)
Pages: 491-509

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Handle: RePEc:spr:empeco:v:44:y:2013:i:2:p:491-509
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  1. Sebastian Vollmer & Hajo Holzmann & Florian Schwaiger, 2013. "Peak vs Components," Review of Development Economics, Wiley Blackwell, vol. 17(2), pages 352-364, 05.
  2. Andreas Schäfer & Thomas Steger, 2010. "History, Expectations, and Public Policy: Economic Development in Eastern Germany," CESifo Working Paper Series 3184, CESifo Group Munich.
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  9. Harald Uhlig, 2006. "Regional Labor Markets, Network Externalities and Migration: The Case of German Reunification," SFB 649 Discussion Papers SFB649DP2006-004, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  10. Michael Funke & Roberta Colavecchio & Declan Curran, 2011. "Drifting together of falling apart? The empirics of regional economic growth in post-unification Germany," Quantitative Macroeconomics Working Papers 21102, Hamburg University, Department of Economics.
  11. Hajo Holzmann & Sebastian Vollmer, 2008. "A likelihood ratio test for bimodality in two-component mixtures with application to regional income distribution in the EU," AStA Advances in Statistical Analysis, Springer, vol. 92(1), pages 57-69, February.
  12. Bianchi, Marco, 1997. "Testing for Convergence: Evidence from Non-parametric Multimodality Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(4), pages 393-409, July-Aug..
  13. Burda, Michael C., 2008. "What kind of shock was it? Regional integration and structural change in Germany after unification," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 557-567, December.
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  15. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-51, April.
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