IDEAS home Printed from
   My bibliography  Save this paper

Some Lessons from Economic Transformation in East Germany


  • Bofinger, Peter
  • Cernohorsky, Ivan


The paper compares the experience with shock therapies in East Germany, Poland and the CSFR. After an analysis of the individual starting conditions and economic performance since the inception of comprehensive reform programmes it focuses on the specific elements of the East German reform strategy. It shows that the short-term impact of huge transfers from West to East Germany was not necessarily positive for East German firms. It identifies the lack of incomes policies as a major flaw in the East German transformation concept. On the positive side the rapid restructuring of the East German financial sector allowed it to overcome the inefficiencies that characterize the banking systems nd enterprise finance in Poland and the CSFR. In addition, with the Treuhand it was possible to establish a functioning principal-agent relation between the government as the owner of state-owned firms and the management of these firms, which is completely absent in Poland and the CSFR. That explains why these two countries were not able to benefit much more from their enormous wage advantage over the former GDR.

Suggested Citation

  • Bofinger, Peter & Cernohorsky, Ivan, 1992. "Some Lessons from Economic Transformation in East Germany," CEPR Discussion Papers 686, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:686

    Download full text from publisher

    File URL:
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Saman Majd & Stewart C. Myers, 1987. "Tax Asymmetries and Corporate Income Tax Reform," NBER Chapters,in: Taxes and Capital Formation, pages 93-96 National Bureau of Economic Research, Inc.
    2. Saman Majd & Stewart C. Myers, 1985. "Valuing the Government's Tax Claim on Risky Corporate Assets," NBER Working Papers 1553, National Bureau of Economic Research, Inc.
    3. Auerbach, Alan, 1990. "The cost of capital and investment in developing countries," Policy Research Working Paper Series 410, The World Bank.
    4. Schanbel, Jacques A & Roumi, Ebrahim, 1990. "A Contingent Claims Analysis of Partial Loss Offset Taxation and Risk-Taking," Public Finance = Finances publiques, , vol. 45(2), pages 304-320.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Karp, Larry & Paul, Thierry, 1998. "Labor adjustment and gradual reform: when is commitment important?," Journal of International Economics, Elsevier, vol. 46(2), pages 333-362, December.
    2. Karp, Larry & Paul, Thierry, 1994. "Labor Adjustment and Gradual Reform:Is Commitment Important?," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7gc7t3nm, Department of Agricultural & Resource Economics, UC Berkeley.

    More about this item


    German Unification; Stabilization; Transition of Socialist Economies; Treuhandanstalt; Wages;

    JEL classification:

    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:686. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.