IDEAS home Printed from https://ideas.repec.org/p/zbw/iwhdps/iwh-14-09.html
   My bibliography  Save this paper

Is East Germany Catching Up? A Time Series Perspective

Author

Listed:
  • Aumann, Bernd
  • Scheufele, Rolf

Abstract

This paper assesses whether the economy of East Germany is catching up with the West German region in terms of welfare. While the primary measure for convergence and catching up is per capita output, we also look at other macroeconomic indicators such as unemployment rates, wage rates, and production levels in the manufacturing sector. In contrast to existing studies of convergence between regions of reunified Germany, our approach is purely based upon the time series dimension and is thus directly focused on the catching up process in East Germany as a region. Our testing setup includes standard ADF unit root tests as well as unit root tests that endogenously allow for a break in the deterministic component of the process. In our analysis, we find evidence of catching up for East Germany for most of the indicators. However, convergence speed is slow, and thus it can be expected that the catching up process will take further decades until the regional gap is closed.

Suggested Citation

  • Aumann, Bernd & Scheufele, Rolf, 2009. "Is East Germany Catching Up? A Time Series Perspective," IWH Discussion Papers 14/2009, Halle Institute for Economic Research (IWH).
    • Handle: RePEc:zbw:iwhdps:iwh-14-09
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/37062/1/607088133.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Pierre Perron & Serena Ng, 1996. "Useful Modifications to some Unit Root Tests with Dependent Errors and their Local Asymptotic Properties," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(3), pages 435-463.
    2. Reinhold Kosfeld & Jorgen Lauridsen, 2009. "Dynamic spatial modelling of regional convergence processes," Studies in Empirical Economics, in: Giuseppe Arbia & Badi H. Baltagi (ed.), Spatial Econometrics, pages 245-261, Springer.
    3. Ralf Bruggemann & Carsten Trenkler, 2007. "Are Eastern European Countries Catching Up? Time Series Evidence for Czech Republic, Hungary and Poland," Applied Economics Letters, Taylor & Francis Journals, vol. 14(4), pages 245-249.
    4. repec:zbw:iwhdps:164 is not listed on IDEAS
    5. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    6. Bayer Christian & Jüßen Falko, 2007. "Convergence in West German Regional Unemployment Rates," German Economic Review, De Gruyter, vol. 8(4), pages 510-535, December.
    7. Falko Juessen, 2009. "A distribution dynamics approach to regional GDP convergence in unified Germany," Empirical Economics, Springer, vol. 37(3), pages 627-652, December.
    8. Bernard, Andrew B. & Durlauf, Steven N., 1996. "Interpreting tests of the convergence hypothesis," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 161-173.
    9. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
    10. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    11. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    12. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    13. Bernard, Andrew B & Durlauf, Steven N, 1995. "Convergence in International Output," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 97-108, April-Jun.
    14. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
    15. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    16. Banerjee, Anindya & Lumsdaine, Robin L & Stock, James H, 1992. "Recursive and Sequential Tests of the Unit-Root and Trend-Break Hypotheses: Theory and International Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 271-287, July.
    17. Francisco Maeso-Fernandez, 2003. "A time series approach to g convergence," Applied Economics, Taylor & Francis Journals, vol. 35(10), pages 1133-1146.
    18. John B. Hall & Udo Ludwig, 2006. "Economic convergence across German regions in light of empirical findings," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 30(6), pages 941-953, November.
    19. Barrell Ray & Willem te Velde Dirk, 2000. "Catching-up of East German Labour Productivity in the 1990s," German Economic Review, De Gruyter, vol. 1(3), pages 271-297, August.
    20. Funke Michael & Strulik Holger, 2000. "Growth and Convergence in a Two-Region Model of Unified Germany," German Economic Review, De Gruyter, vol. 1(3), pages 363-384, August.
    21. Li, Qing & Papell, David, 1999. "Convergence of international output Time series evidence for 16 OECD countries," International Review of Economics & Finance, Elsevier, vol. 8(3), pages 267-280, September.
    22. Christiano, Lawrence J, 1992. "Searching for a Break in GNP," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 237-250, July.
    23. Frank Siebern, 2000. "Growth and Convergence in a Two‐Region Model of Unified Germany," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 363-384, August.
    24. Reinhold Kosfeld & Hans-Friedrich Eckey & Christian Dreger, 2006. "Regional productivity and income convergence in the unified Germany, 1992-2000," Regional Studies, Taylor & Francis Journals, vol. 40(7), pages 755-767.
    25. Hassler Uwe & Demetrescu Matei, 2005. "Spurious Persistence and Unit Roots due to Seasonal Differencing: The Case of Inflation Rates / Künstliche Persistenz und Einheitswurzeln infolge saisonaler Differenzen: Das Beispiel Inflationsraten," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 225(4), pages 413-426, August.
    26. Evans, Paul & Karras, Georgios, 1996. "Convergence revisited," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 249-265, April.
    27. Brautzsch, Hans-Ulrich & Ludwig, Udo, 2002. "Vierteljährliche Entstehungsrechnung des Bruttoinlandsprodukts für Ostdeutschland: Sektorale Bruttowertschöpfung," IWH Discussion Papers 164/2002, Halle Institute for Economic Research (IWH).
    28. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-1085, December.
    29. repec:bla:germec:v:8:y:2007:i::p:510-535 is not listed on IDEAS
    30. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-618, Nov.-Dec..
    31. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-251, April.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Frank Scharr, 2009. "Aufbau Ost 20 Jahre nach dem Mauerfall: Ziele und Aufgaben für die nächsten Jahre," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 62(18), pages 43-48, September.
    2. Bönisch, Peter & Schneider, Lutz, 2010. "Why are East Germans not More Mobile? Analyzing the Impact of Social Ties on Regional Migration," IWH Discussion Papers 16/2010, Halle Institute for Economic Research (IWH).
    3. Jan Kluge & Michael Weber, 2015. "Decomposing the German East-West wage gap," ifo Working Paper Series 205, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    4. Peter Mihalyi, 2012. "The Causes of Slow Growth in Hungary during the Post-Communist Transformation Period," CERS-IE WORKING PAPERS 1216, Institute of Economics, Centre for Economic and Regional Studies.
    5. Jan Kluge & Michael Weber, 2018. "Decomposing the German East–West wage gap," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 26(1), pages 91-125, January.
    6. Wolfgang Nagl, 2014. "Lohnrisiko und Altersarmut im Sozialstaat," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 54.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cunado, J. & Perez de Gracia, F., 2006. "Real convergence in Africa in the second-half of the 20th century," Journal of Economics and Business, Elsevier, vol. 58(2), pages 153-167.
    2. repec:ebl:ecbull:v:6:y:2005:i:13:p:1-20 is not listed on IDEAS
    3. Eftychia Tsanana & Constantinos Katrakilidis, 2014. "Do Balkan economies catch up with EU? New evidence from panel unit root analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(4), pages 641-662, November.
    4. Kian-Ping Lim & M. Azali & Hock-Ann Lee, 2005. "Income Disparity between Japan and ASEAN-5 Economies: Converge, Catching Up or Diverge?," Economics Bulletin, AccessEcon, vol. 6(13), pages 1-20.
    5. Strazicich, Mark C. & Lee, Junsoo & Day, Edward, 2004. "Are incomes converging among OECD countries? Time series evidence with two structural breaks," Journal of Macroeconomics, Elsevier, vol. 26(1), pages 131-145, March.
    6. Carlino, Gerald A. & Mills, Leonard, 1996. "Testing neoclassical convergence in regional incomes and earnings," Regional Science and Urban Economics, Elsevier, vol. 26(6), pages 565-590, December.
    7. Magrini, Stefano, 2004. "Regional (di)convergence," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 62, pages 2741-2796, Elsevier.
    8. Miguel Lebre de Freitas, 2006. "Portugal–EU Convergence Revisited: Evidence for the Period 1960–2003," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 12(3), pages 408-418, August.
    9. Loewy, Michael B. & Papell, David H., 1996. "Are U.S. regional incomes converging? Some further evidence," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 587-598, December.
    10. Steven Cook, 2008. "An alternative perspective on the stochastic convergence of incomes in the United States," Applied Economics Letters, Taylor & Francis Journals, vol. 15(12), pages 929-934.
    11. Zhang, Zongyi & Liu, Aying & Yao, Shujie, 2001. "Convergence of China's regional incomes: 1952-1997," China Economic Review, Elsevier, vol. 12(2-3), pages 243-258.
    12. Evan Lau & Koon Po Lee, 2008. "Interdependence of income between China and ASEAN‐5 countries," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing Limited, vol. 1(2), pages 148-161, June.
    13. Hans-Friedrich Eckey & Reinhold Kosfeld & Matthias Türck, 2007. "Regional Convergence in Germany: a Geographically Weighted Regression Approach," Spatial Economic Analysis, Taylor & Francis Journals, vol. 2(1), pages 45-64.
    14. David EA Giles, 2005. "Output Convergence and International Trade: Time-Series and Fuzzy Clustering Evidence for New Zealand and her Trading Partners, 1950 - 1992," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(1), pages 93-114.
    15. Burcu Ozcan, 2014. "Does Income Converge among EU Member Countries following the Post-War Period? Evidence from the PANKPSS Test," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 22-38, October.
    16. Diego Romero‐Ávila, 2009. "The Convergence Hypothesis For Oecd Countries Reconsidered: Panel Data Evidence With Multiple Breaks, 1870–2003," Manchester School, University of Manchester, vol. 77(4), pages 552-574, July.
    17. John List, 1999. "Have Air Pollutant Emissions Converged Amongst U.S. Regions?," Natural Field Experiments 00528, The Field Experiments Website.
    18. A. F. Galvao Jr & F. A. Reis Gomes, 2007. "Convergence or divergence in Latin America? A time series analysis," Applied Economics, Taylor & Francis Journals, vol. 39(11), pages 1353-1360.
    19. Giorgio Canarella & Stephen Miller & Stephen Pollard, 2011. "The Global Financial Crisis and Stochastic Convergence in the Euro Area," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 17(3), pages 315-333, August.
    20. Juncal Cunado & Luis A. Gil-Alana & Fernando Pérez de Gracia, 2006. "Additional Empirical Evidence on Real Convergence: A Fractionally Integrated Approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(1), pages 67-91, April.
    21. Burak GÜRIŞ & İpek M. YURTTAGÜLER & Muhammed TIRAŞOĞLU, 2017. "Unemployment convergence analysis for Nordic countries: Evidence from linear and nonlinear unit root tests," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 45-56, Spring.

    More about this item

    Keywords

    East Germany; Catching up; Convergence; Unit root tests; Ostdeutschland; Aufholprozess; Konvergenz; Einheitswurzeltests;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

    Statistics

    Access and download statistics

    Corrections

    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:zbw:iwhdps:iwh-14-09. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/iwhhhde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.