Why East Germany Did Not Become a New Mezzogiorno

34 Pages Posted: 16 May 2016

See all articles by Andrea Boltho

Andrea Boltho

University of Oxford - Magdalen College

Wendy Carlin

University College London - Department of Economics; Centre for Economic Policy Research (CEPR)

Pasquale Scaramozzino

University of Rome II - Faculty of Economics; University of London - School of Oriental and African Studies (SOAS); University of London - Centre for Financial and Management Studies (CeFIMS)

Date Written: May 2016

Abstract

In an earlier paper (Journal of Comparative Economics, 1997) the authors argued, against the conventional wisdom of the time, that East Germany was unlikely to follow a development path similar to that of the Italian Mezzogiorno. This paper revisits the issue some 25 years after German reunification. Statistical tests show that the absence of income per capita convergence between South and North that has characterized Italy since the war, continued over the last two or more decades. Germany, on the other hand, has, over the same period, seen significant income convergence between East and West. The main explanations that are provided for such contrasting outcomes stress differences between the two countries (and within the two countries) in investment performance, in labour market flexibility, and, in particular, in developments in the tradeable sector whose performance in East Germany has been much superior to that of the Mezzogiorno. These differences, in turn, are linked to very different standards of institutional quality and governance which are almost certainly rooted in the two "poor" regions' longer-run history.

Keywords: convergence, institutional quality, labour market flexibility, tradeables

JEL Classification: O57, R12, R58

Suggested Citation

Boltho, Andrea and Carlin, Wendy and Scaramozzino, Pasquale, Why East Germany Did Not Become a New Mezzogiorno (May 2016). CEPR Discussion Paper No. DP11266, Available at SSRN: https://ssrn.com/abstract=2780374

Andrea Boltho (Contact Author)

University of Oxford - Magdalen College ( email )

Magdalen College
Oxford, OX1 4AU
United Kingdom

Wendy Carlin

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom
+44 20 7679 5858 (Phone)
+44 20 7916 2775 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Pasquale Scaramozzino

University of Rome II - Faculty of Economics ( email )

Via Columbia n.2
Rome, 00100
Italy

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
Russell Square: College Buildings 541
London, WC1H 0XG
United Kingdom

University of London - Centre for Financial and Management Studies (CeFIMS)

Thornhaugh Street
London, WC1H 0XG
United Kingdom

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