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Germany's Economic Unification. An Assessment after Ten Years

  • Hans-Werner Sinn

A political miracle occurred when Germany was reunited, and at first glance an economic miracle has followed. Real incomes in the east have now reached the western level, and investment per capita has been much higher than in the w est. However, every third deutschmark spent in the east has been coming from the west, investment in equipment has fallen below the west German per capita level, and convergence seems to have come to a halt at an overall labor productivity of only 55% of west Germany. Excessively high wages coupled with investment incentives that made the cost of capital negative rank high among the possible explanations. This paper describes reforms of the labor market that could help to make convergence continue.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 247.

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Date of creation: 2000
Date of revision:
Handle: RePEc:ces:ceswps:_247
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  1. Boltho, Andrea & Carlin, Wendy & Scaramozzino, Pasquale, 1997. "Will East Germany Become a New Mezzogiorno?," Journal of Comparative Economics, Elsevier, vol. 24(3), pages 241-264, June.
  2. Keller, W., 1996. "From Socialist Chowcase to Mezzogiorno? Lessons on the Role of Technical Change from East Germany's Post-World War II Growth Performance," Working papers 9623, Wisconsin Madison - Social Systems.
  3. Wolfgang Franz & Viktor Steiner, 2000. "Wages in the East German Transition Process: Facts and Explanations," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 241-269, 08.
  4. Wolfgang Nierhaus, 1999. "Höhere Rentenanpassung in Ostdeutschland erforderlich?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 52(19), pages 20-24, October.
  5. Hans-Werner Sinn, 1999. "EU Enlargement, Migration, and Lessons from German Unification," CESifo Working Paper Series 182, CESifo Group Munich.
  6. repec:elg:eechap:1359_13 is not listed on IDEAS
  7. Henning Klodt, 1999. "Industrial Policy and the East German Productivity Puzzle," Kiel Working Papers 943, Kiel Institute for the World Economy.
  8. 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.
  9. Karl-Heinz Paque, 1999. "Zehn Jahre Aufbau Ost: eine Zwischenbilanz," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 52(34), pages 13-19, 02.
  10. Albert Müller, 2000. "Aufholprozess der ostdeutschen Wirtschaft stagniert," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 53(3), pages 9-16, 02.
  11. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
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