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Real adjustment in the transformation process: Risk factors in East Germany

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  • Siebert, Horst

Abstract

East Germany can be considered as a laboratory experiment in the economics of transition. Of the three major issues of economic reform in the transformation process (Siebert 1991c), two were solved nearly instantaneously. Monetary stabilization was achieved by extending the currency area of the DM to East Germany in the currency union of July 1, 1990. And the institutional infrastructure was introduced with one stroke when East Germany joined West Germany according to Article 23 of the German constitution. Thus, only the third major area of reform remained to be solved, namely real adjustment in the economy, especially in the previously state owned firms. The transformation of the East German economy thus can be viewed to be a specific exercise in real economic adjustment. In this paper I look at some of the risks that may arise from the transformation process in East Germany for German economic policy. Some factors which represented risks in 1990 no longer do because either a positive or a negative outcome has to be recorded (Section 1 ). The remaining risks relate to getting trapped on a low level of development in East Germany (Section 2 ) , to privatization getting stuck (Section 3 ), to an explicit structural policy (Section 4 ), to a persistence of the second labor market (Section 5 ) , and to transfers turning into a burden for Germany as a whole (Section 6 ). Some conclusions are drawn in Section 7.
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  • Siebert, Horst, 1992. "Real adjustment in the transformation process: Risk factors in East Germany," Open Access Publications from Kiel Institute for the World Economy 1915, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwkie:1915
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    References listed on IDEAS

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    1. Wyplosz, Charles, 1991. "A Note on the Real Exchange Rate Effect of German Unification," CEPR Discussion Papers 527, C.E.P.R. Discussion Papers.
    2. Charles Wyplosz, 1991. "On the real exchange rate effect of German unification," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 127(1), pages 1-17, March.
    3. Ngo Long & Horst Siebert, 1992. "A model of the socialist firm in transition to a market economy," Journal of Economics, Springer, vol. 56(1), pages 1-21, February.
    4. Maurer, Rainer & Sander, Birgit & Schmidt, Klaus-Dieter, 1991. "Privatisierung in Ostdeutschland: zur Arbeit der Treuhandanstalt," Open Access Publications from Kiel Institute for the World Economy 1487, Kiel Institute for the World Economy (IfW).
    5. Collier, Irwin L, Jr & Siebert, Horst, 1991. "The Economic Integration of Post-Wall Germany," American Economic Review, American Economic Association, vol. 81(2), pages 196-201, May.
    6. Siebert, Horst, 1990. "The economic integration of Germany – An update," Kiel Discussion Papers 160a, Kiel Institute for the World Economy (IfW).
    7. Boss, Alfred, 1991. "Mittelfristige Perspektiven der Finanzpolitik," Open Access Publications from Kiel Institute for the World Economy 1506, Kiel Institute for the World Economy (IfW).
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    Cited by:

    1. Michael Burda & Michael Funke, 1993. "German trade unions after unification — Third degree wage discriminating monopolists?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 129(3), pages 537-560, September.
    2. Raiser, Martin, 1992. "Soft budget constraints: An institutional interpretation of stylised facts in economic transformation in Central Eastern Europe," Kiel Working Papers 549, Kiel Institute for the World Economy (IfW).

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