Citation

Discussion Paper Details

Please find the details for DP956 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Unification and the Policy Predicament in Germany

Author(s): Andrew Hughes Hallett, Yue Ma and Jacques Melitz

Publication Date: May 1994

Keyword(s): German Unification, Regional Convergence and Wage Subsidies

Programme Area(s): International Macroeconomics

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 ten 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 ten 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 ten years. Thus serious problems loom ahead.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=956

Bibliographic Reference

Hughes Hallett, A, Ma, Y and Melitz, J. 1994. 'Unification and the Policy Predicament in Germany'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=956