Growth and Convergence in a Two-Region Model of Uni ed Germany
نویسندگان
چکیده
The paper sets up a two-region endogenous growth model to discuss growth and regional convergence of uni ed Germany. It emphasises the role of private and public capital accumulation during the developing process. The theoretical part derives scal policy rules which establish convergence of regional output per capital and convergence of regional human wealth. To assess the speed of convergence the model is calibrated with German data. Given a scal policy rule that is consistent with the data on government spending in East and West Germany after uni cation the model suggests that East Germany will reach eighty percent of West Germany's income per capita between 20 and 30 years after uni cation and that actual transfers are approximately su cient to equalise regional human wealth. The results are compared with an extension of the model that includes wage setting behaviour and unemployment in the eastern region.
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