Discussion Paper Details

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Title: Will East Germany Become a New Mezzogiorno?

Author(s): Andrea Boltho, Wendy Carlin and Pasquale Scaramozzino

Publication Date: February 1996

Keyword(s): Convergence, Regional Development and Regional Economic Policy

Programme Area(s): Transition Economics

Abstract: Despite massive regional policy efforts, GDP per capita in Southern Italy has only briefly converged on Northern Italian levels (during the 1960s). Failure since then is associated with a policy switch from investment towards income maintenance, with reduced wage sensitivity to regional labour market conditions and with increases in rent-seeking opportunities and corruption. East Germany?s early experience of rapid wage and income, but not productivity, convergence raised fears that a Mezzogiorno scenario could be repeated. Since then, however, investment has been successfully encouraged, wage setting has become more flexible and productivity growth has risen. Given a more favourable non-economic environment as well, the prospects for East German convergence are now more promising.

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Bibliographic Reference

Boltho, A, Carlin, W and Scaramozzino, P. 1996. 'Will East Germany Become a New Mezzogiorno?'. London, Centre for Economic Policy Research.