Economic Convergence and Divergence in Europe
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Economic Convergence and Divergence in Europe

Growth and Regional Development in an Enlarged European Union

Edited by Gertrude Tumpel-Gugerell and Peter Mooslechner

This highly topical book addresses the challenge of economic convergence within Europe, beginning with a thorough review of the theory of growth and related empirical research. Historical and more recent economic developments within the present EU and current accession countries are discussed, along with the design for the process of further integration of accession countries into the EU and the Euro area. Moreover, the potential to achieve a sustainable catch-up process in Western Balkan countries, the Ukraine and Russia is explored, focusing on the task facing the EU in designing proper policies vis-à-vis these countries. The contributors’ varied perspectives ensure that the theories and policies postulated are linked closely with the actual situation in accession countries and offer up-to-date insights.
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Chapter 6: German economic reunification: a special case with general lessons?

Karl-Heinz Paqué

Extract

6. German economic reunification: a special case with general lessons? Karl-Heinz Paqué 6.1. FUNDAMENTAL FACTS When the two German economies were reunited in 1990, they started roughly on a par with the comparable neighbour countries within their respective economic systems. Labour productivity and per capita income were: ● ● only slightly higher in western Germany than in France; probably only slightly higher in eastern Germany than in the territory of what is today the Czech Republic. Unfortunately, a direct comparison of western and eastern national accounts before unification is very difficult because of the lack of market values in command economies. Nevertheless, there is no doubt whatsoever that the per capita and labour productivity gap between the two parts of the country was vast by any standard. In 1991, the first year for which reasonable national accounts have been calculated for eastern Germany on a market value basis, eastern labour productivity (GDP per worker) stood at roughly one-third of the western level – after large-scale lay-offs and a first wave of heavy industrial restructuring had already taken place. From this level, an extremely fast process of convergence of eastern towards western productivity levels set in. By 1996, the east reached roughly two-thirds of the western productivity level. Given the much higher unemployment rate, which is about twice as high in the east as in the west, that productivity gap translated into an eastern per capita income of 60 per cent of the west. Since that time, not much has...

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