History, Expectations, and Public Policy: Economic Development in Eastern Germany
40 Pages Posted: 30 Sep 2010
Date Written: September 29, 2010
Abstract
Motivated by the process of economic development in Eastern Germany since the German reunification we set up a dynamic macroeconomic model of a small open economy where both capital and labor are mobile and there are increasing returns to scale at the aggregate level. The model features multiple equilibria as well as (local and global) indeterminacy. Expectations matter for resulting equilibrium dynamics, implying that economic confidence may be crucial for the process of economic development. Despite its simplicity, the model can replicate major empirical facts and bears a number of non-trivial implications.
Keywords: increasing returns to scale, capital mobility, migration, multiple equilibria, indeterminacy, history vs. expectations, economic policy
JEL Classification: E60, H20, O40
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Trade Union Membership and Dismissals
By Laszlo Goerke and Markus Pannenberg
-
The Twin Effects of Globalization
By Francesco Daveri, Paolo Manasse, ...
-
By Ben J. Heijdra, Jochen O. Mierau, ...
-
A Micro Data Aproach to the Identification of Credit Crunches
-
A Different Look at Lenin's Legacy: Trust, Risk, Fairness and Cooperativeness in the Two Germanies
By Guido Heineck and Bernd Süssmuth
-
Inefficient Group Organization as Optimal Adaptation to Dominant Environments
By Martin Kolmar and Andreas Wagener
-
By Daniel Osberghaus and Christiane Reif
-
Global Warming and Extreme Events: Rethinking the Timing and Intensity of Environmental Policy
By Yu-fu Chen and Michael Funke