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Title:What kind of shock was it?: regional integration and structural change in Germany after unification PDF Logo
Authors:Burda, Michael C.
Issue Date:2006
Series/Report no.:SFB 649 discussion paper 2006,087
Abstract:Eastern Germany's recovery from the unification shock has been characterized by deep structural change - with apparent repercussions for the West as well - and an integration process involving both capital deepening (extensive and intensive investment) and labor thinning (net out-migration). I propose a constant-returns neoclassical model of economic integration which can account for these facts. Adjustment costs determine dynamics and steady state regional distribution of production factors. The model also explains persistent wage and capital rate-of-return differentials along the equilibrium path. Under competitive conditions, observed factor price differentials contain information on those adjustment costs.
Subjects:German reunification
regional integration
costs of adjustment
capital mobility
migration
JEL:F2
J61
P23
Document Type:Working Paper
Appears in Collections:SFB 649 Discussion Papers, HU Berlin

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