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The Costs of Remoteness: Evidence from German Division and Reunification

  • Stephen Redding
  • Daniel M. Sturm

This paper exploits the division of Germany after the Second World War and the reunificationof East and West Germany in 1990 as a natural experiment to provide evidenceof the importance of market access for economic development. In line with a standard neweconomic geography model, we find that following division cities in West Germany that wereclose to the new border between East and West Germany experienced a substantial decline inpopulation growth relative to other West German cities. We provide several pieces of evidencethat the decline of the border cities can be entirely accounted for by their loss in market accessand is neither driven by differences in industrial structure nor differences in the degree of warrelated destruction. Finally, we also find some first evidence of a recovery of the border citiesafter the re-unification of East and West Germany.

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File URL: http://sticerd.lse.ac.uk/dps/pepp/PEPP11.pdf
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Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Political Economy and Public Policy Paper Series with number 11.

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Date of creation: Aug 2005
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Handle: RePEc:cep:stipep:11
Contact details of provider: Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

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  1. Sinn, Hans-Werner, 2002. "Germany’s Economic Unification: An Assessment after Ten Years," Munich Reprints in Economics 19643, University of Munich, Department of Economics.
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  12. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
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  14. Steven Brakman & Harry Garretsen & Marc Schramm, 2004. "The strategic bombing of German cities during World War II and its impact on city growth," Journal of Economic Geography, Oxford University Press, vol. 4(2), pages 201-218, April.
  15. Donald R. Davis & David E. Weinstein, 2002. "Bones, Bombs, and Break Points: The Geography of Economic Activity," American Economic Review, American Economic Association, vol. 92(5), pages 1269-1289, December.
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  22. repec:spo:wpecon:info:hdl:2441/10191 is not listed on IDEAS
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  26. John Luke Gallup & Jeffrey D. Sachs & Andrew D. Mellinger, 1998. "Geography and Economic Development," NBER Working Papers 6849, National Bureau of Economic Research, Inc.
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