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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- 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.
"Factor Reallocation in Eastern Germany after Reunification,"
American Economic Review,
American Economic Association, vol. 96(2), pages 368-374, May.
- 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.
- David Aschauer, 1988.
"Is public expenditure productive?,"
88-7, Federal Reserve Bank of Chicago.
- 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 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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