Resource title

What kind of shock was it? : Regional integration and structural change in Germany after unification

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Resource description

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.

Resource author

Michael C. Burda

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/17834

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Adapt according to the presented license agreement and reference the original author.