Paqué, Karl-Heinz --- "German economic reunification: a special case with general lessons?" [2003] ELECD 12; in Tumpel-Gugerell, Gertrude; Mooslechner, Peter (eds), "Economic Convergence and Divergence in Europe" (Edward Elgar Publishing, 2003)

Book Title: Economic Convergence and Divergence in Europe

Editor(s): Tumpel-Gugerell, Gertrude; Mooslechner, Peter

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843762416

Section: Chapter 6

Section Title: German economic reunification: a special case with general lessons?

Author(s): Paqué, Karl-Heinz

Number of pages: 9

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 rea-
sonable 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 unem-
ployment 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 ...