Unification and the policy predicament in Germany

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

12 Scopus Citations
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Author(s)

  • A. Hughes Hallett
  • Y. Ma
  • J. Mélitz

Detail(s)

Original languageEnglish
Pages (from-to)519-544
Journal / PublicationEconomic Modelling
Volume13
Issue number4
Publication statusPublished - Oct 1996
Externally publishedYes

Abstract

We argue that wages have increased so far ahead of labour productivity in east Germany as to produce a problem that will continue to hound German policy-makers for the next two decades. Despite rapid rates of capital accumulation (around 9%) and growth (around 5%) in east Germany over the coming 10 years, our estimates show that even if wage catch-up decelerates greatly, as long as it continues, the rate of unemployment in the east will still be twice as high as in the west in another 10 years. Alternatively, if wage discipline forces the eastern unemployment rate to come down to the western level, wage differentials will widen substantially over these next 10 years. Thus serious problems loom ahead.

Research Area(s)

  • German unification, Regional convergence, Wage subsidies

Citation Format(s)

Unification and the policy predicament in Germany. / Hughes Hallett, A.; Ma, Y.; Mélitz, J.

In: Economic Modelling, Vol. 13, No. 4, 10.1996, p. 519-544.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review