History, Expectations, and Public Policy: Economic Development in Eastern Germany
Motivated by the process of economic development in Eastern Germany since the German reunification we set up a dynamic macroeconomic model of a small open economy where both capital and labor are mobile and there are increasing returns to scale at the aggregate level. The model features multiple equilibria as well as (local and global) indeterminacy. Expectations matter for resulting equilibrium dynamics, implying that economic confidence may be crucial for the process of economic development. Despite its simplicity, the model can replicate major empirical facts and bears a number of non-trivial implications.
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- Burda, Michael C. & Fuchs-Schündeln, Nikola & Buch, Claudia M. & Sinn, Hans-Werner, 2006.
"Factor reallocation in eastern Germany after reunification,"
Munich Reprints in Economics
19974, University of Munich, Department of Economics.
- Michael C. Burda, 2006. "Factor Reallocation in Eastern Germany after Reunification," American Economic Review, American Economic Association, vol. 96(2), pages 368-374, May.
- Jennifer Hunt, 2006. "Staunching Emigration from East Germany: Age and the Determinants of Migration," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 1014-1037, 09.
- Michael C. Burda, 2007.
"What kind of shock was it? Regional Integration and Structural Change in Germany after Unification,"
Kiel Working Papers
1306, Kiel Institute for the World Economy.
- 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.
- Michael C. Burda, 2006. "What kind of shock was it? Regional Integration and Structural Change in Germany after Unification," SFB 649 Discussion Papers SFB649DP2006-087, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- David Aschauer, 1988.
"Is public expenditure productive?,"
88-7, Federal Reserve Bank of Chicago.
- Michael Funke & Holge Strulik, 1999. "Growth and Convergence in a Two-Region Model of Unified Germany," CESifo Working Paper Series 206, CESifo Group Munich.
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