DP984 An Exercise in Futility: East German Economic Growth and Decline, 1945-89

Author(s): Albrecht Ritschl
Publication Date: July 1994
Keyword(s): Autarky, Comparative Productivity, East Germany, Economic Transition, Socialist Planning
JEL(s): N1, N4, O5, P3
Programme Areas: Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=984

This paper assembles and reviews data on growth performance for East Germany. Conclusions are only tentative, as data reliability is still poor. Examining factor growth and total factor productivity performance, the paper arrives at three main conclusions. First, large-scale dismantling of capital by the Soviets was outweighed by migration, such that the aggregate capital-labour ratio in East Germany around 1950 was similar to that of West Germany. Second, the record of productivity growth follows the common pattern for Western countries. The productivity slowdown set in with a delay, however, as foreign borrowing and subsidized oil imports isolated East Germany from the first oil shock. Third, when these subsidies ended and debt service mounted, East Germany ran into a debt crisis, with productivity growth becoming zero or even negative in the 1980s.