The macroeconomic effects of German unification: Real adjustments and the welfare state
We study the effects of German unification in a model with capital accumulation, skill differences and a welfare state. We argue that this event is similar to a mass migration of low-skilled agents holding no capital into a foreign country. Absent a welfare state, we observe an investment boom, depressed output and employment conditions. Capital owners and high-skilled agents are willing to give up to 4% of per-capita consumption to favor unification. When a welfare state exists the investment boom disappears and the recession is prolonged. Now, with unification, capital owners and high-skilled agents lose 4% of per-capita consumption.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Canova, Fabio & Ravn, Morten O, 1998.
"Crossing the Rio Grande: Migrations, Business Cycles and the Welfare State,"
CEPR Discussion Papers
2040, C.E.P.R. Discussion Papers.
- Morten O. Ravn & Fabio Canova, 1997. "Crossing the Rio Grande: Migrations, business cycles and the welfare state," Economics Working Papers 248, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 1997.
- Andrea Boltho & Wendy Carlin & Pasquale Scaramozzino, 1999.
"Will East Germany become a new Mezzogiorno?,"
in: Economic Growth and Change, chapter 13
- Canova, Fabio & Marrinan, Jane, 1998. "Sources and propagation of international output cycles: Common shocks or transmission?," Journal of International Economics, Elsevier, vol. 46(1), pages 133-166, October.
- Gerlinde Sinn & Hans-Werner Sinn, 1994. "Jumpstart: The Economic Unification of Germany," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691728, June.
- Bertocchi, Graziella & Spagat, Michael, 2004.
"The evolution of modern educational systems: Technical vs. general education, distributional conflict, and growth,"
Journal of Development Economics,
Elsevier, vol. 73(2), pages 559-582, April.
- Bertocchi, Graziella & Spagat, Michael, 1998. "The Evolution of Modern Educational Systems: Technical Vs. General Education, Distributional Conflict and Growth," CEPR Discussion Papers 1925, C.E.P.R. Discussion Papers.
- N. Gregory Mankiw & Stephen P. Zeldes, 1990.
"The Consumption of Stockholders and Non-Stockholders,"
NBER Working Papers
3402, National Bureau of Economic Research, Inc.
- Mankiw, N. Gregory & Zeldes, Stephen P., 1991. "The consumption of stockholders and nonstockholders," Journal of Financial Economics, Elsevier, vol. 29(1), pages 97-112, March.
- Mankiw, N.G. & Zeldes, S.P., 1990. "The Consumption Of Stockholders And Non-Stockholders," Weiss Center Working Papers 23-90, Wharton School - Weiss Center for International Financial Research.
- Hall, Robert E & Mishkin, Frederic S, 1982.
"The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households,"
Econometric Society, vol. 50(2), pages 461-81, March.
- Robert E. Hall & Frederic S. Mishkin, 1980. "The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households," NBER Working Papers 0505, National Bureau of Economic Research, Inc.
- Rios-Rull, Jose-Victor, 1993. "Working in the Market, Working at Home, and the Acquisition of Skills: A General-Equilibrium Approach," American Economic Review, American Economic Association, vol. 83(4), pages 893-907, September.
- Cardia, Emanuela, 1991. "The dynamics of a small open economy in response to monetary, fiscal, and productivity shocks," Journal of Monetary Economics, Elsevier, vol. 28(3), pages 411-434, December.
- Benhabib, Jess, 1996. "On the political economy of immigration," European Economic Review, Elsevier, vol. 40(9), pages 1737-1743, December.
- Schrettl, Wolfram, 1992. "Transition with Insurance: German Unification Reconsidered," Oxford Review of Economic Policy, Oxford University Press, vol. 8(1), pages 144-55, Spring.
- Finn E. Kydland, 1993. "Business cycles and aggregate labor-market fluctuations," Working Paper 9312, Federal Reserve Bank of Cleveland.
- John Y. Campbell & N. Gregory Mankiw, 1989.
"Consumption, Income and Interest Rates: Reinterpreting the Time Series Evidence,"
in: NBER Macroeconomics Annual 1989, Volume 4, pages 185-246
National Bureau of Economic Research, Inc.
- John Y. Campbell & N. Gregory Mankiw, 1989. "Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence," NBER Working Papers 2924, National Bureau of Economic Research, Inc.
- Razin, A. & Sadka, E., 1992.
"Resisting Migration: Wage Rigidity and Income Redistribution,"
28-94, Tel Aviv.
- Razin, Assaf & Sadka, Efraim, 1995. "Resisting Migration: Wage Rigidity and Income Distribution," American Economic Review, American Economic Association, vol. 85(2), pages 312-16, May.
- Razin, Assaf & Sadka, Efraim, 1995. "Resisting Migration: Wage Rigidity and Income Distribution," CEPR Discussion Papers 1091, C.E.P.R. Discussion Papers.
- 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.
- Hughes Hallett, A J & Ma, Yue, 1993. "East Germany, West Germany, and Their Mezzogiorno Problem: A Parable for European Economic Integration," Economic Journal, Royal Economic Society, vol. 103(417), pages 416-28, March.
- Kydland, Finn E., 1984. "Labor-force heterogeneity and the business cycle," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 21(1), pages 173-208, January.
- Calvo, Guillermo A & Obstfeld, Maurice, 1988. "Optimal Time-Consistent Fiscal Policy with Finite Lifetimes," Econometrica, Econometric Society, vol. 56(2), pages 411-32, March.
- Driffill, John & Marcus Miller, 1998. "No Credit for Transition:Efficiency Wages, the Maastricht Treaty and German Unemployment," CSGR Working papers series 04/98, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
- Frenkel, Jacob A & Razin, Assaf, 1986. "Fiscal Policies in the World Economy," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 564-94, June.
When requesting a correction, please mention this item's handle: RePEc:upf:upfgen:442. 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: ()
If references are entirely missing, you can add them using this form.