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The Economics of German Unification after Twenty-Five Years: Lessons for Korea

Author

Listed:
  • Michael C. Burda

    (Humboldt Universität zuBerlin, CEPR and IZA)

  • Mark Weder

    (School of Economics, University of Adelaide)

Abstract
This paper reviews the performance of the East German economy in the turbulent quarter-century following reunification and draws some conclusions for the reunification of North and South Korea. In this period, the gap in output per capita between East and West Germany declined at a speed not far from empirical estimates of the neoclassical growth model, yet systematic total factor productivity differentials persist despite identical institutional frameworks and significant investment in the eastern regions. At the same time, regional disparities in income, well-being, and health are little different from those found within West Germany, and net migration has ceased. On this human metric, German unification has been an unqualified success. For Korea, an effort of this dimension will be costly. A back-of-the-envelope calculation suggests that Korean unification will cost roughly twice as much as its German counterpart.

Suggested Citation

  • Michael C. Burda & Mark Weder, 2017. "The Economics of German Unification after Twenty-Five Years: Lessons for Korea," School of Economics and Public Policy Working Papers 2017-07, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:2017-07
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    File URL: https://media.adelaide.edu.au/economics/papers/doc/wp2017-07.pdf
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    References listed on IDEAS

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    Cited by:

    1. Moon, Weh-Sol & Mun, Sung Min & Lee, Jong-Kyu, 2018. "Macroeconomic impact of Korean reunification: The role of factor market opening," Journal of Asian Economics, Elsevier, vol. 58(C), pages 36-58.

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    More about this item

    Keywords

    East Germany; convergence; total factor productivity; Korean unification.;
    All these keywords.

    JEL classification:

    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy

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