Investment and Employment Adjustment after Unification: Some Results from a Macroeconometric Disequilibrium Model

Radowski, Daniel ; Smolny, Werner ; Winker, Peter

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URN: urn:nbn:de:bsz:180-madoc-5875
Document Type: Working paper
Year of publication: 1999
The title of a journal, publication series: ZEW Discussion Papers
Volume: 99-56
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: E24 C51 E22 ,
Subject headings (SWD): Deutschland <Westliche Länder> , Deutschland / Vereinigung , Makroökonomie , Ungleichgewichtsmodell
Abstract: The macroeconomic development in West Germany in the aftermath of unification was characterized by a boom period in 1990/1991, a deep recession in 1992/1993 and a slow recovery since then. In East Germany, in contrast, unification induced a breakdown of production and employment followed by a slow recovery starting in 1992. In this paper, a macroeconometric model is used to assess this development. In particular, estimation results for investment and employment adjustment after unification are reported. The estimates are based on a disequilibrium model formerly developed for West Germany and extended in this paper to cover also unified Germany. The results reveal that the adjustment of investment and employment can be analysed with the same theoretical model for West and East Germany. However, the adjustment speed for investment differs significantly at least in the early years after unification, while changes in the mismatch on the labour market and employment adjustment are less pronounced.
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