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The Costs of Remoteness: Evidence from German Division and Reunification

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  • Stephen Redding
  • Daniel M. Sturm

Abstract

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.

Suggested Citation

  • Stephen Redding & Daniel M. Sturm, 2005. "The Costs of Remoteness: Evidence from German Division and Reunification," STICERD - Political Economy and Public Policy Paper Series 11, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stipep:11
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    Keywords

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • N94 - Economic History - - Regional and Urban History - - - Europe: 1913-
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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