Since Italy’s monetary unification some 155 years ago, income per capita in the South (the Mezzogiorno) has fallen from virtually the same level as in the Centre-North to little more than 55% of the Centre-North’s level. This column asks why East Germany hasn’t suffered the same fate since German monetary unification 25 years ago. East Germany is not like the Mezzogiorno because of labour market flexibility, different evolutions of the tradeable sector, and the weight of history.
Andrea Boltho, Wendy Carlin, Pasquale Scaramozzino, 13 June 2016
Gerlinde Sinn, Hans-Werner Sinn, 01 November 2015
With a European transfer union on the cards, we can learn a lot from Germany’s reunification – a transfer union of sorts. This column takes us through various lessons, concluding that transfers would cement southern Europe’s lack of competitiveness and drive Europe into permanent stagnation.
William Kerr, Oliver Falck, Christina Günther, Stephan Heblich, 11 February 2013
Governments around the world are fostering industrial ‘clusters’, hoping to create agglomeration economies. Using the political division of Germany in 1949, this column argues that heightened firm density can raise costs for incumbent firms in addition to the often-cited agglomeration benefits. This is important for policymakers contemplating efforts to promote their local areas by targeted cluster initiatives and bidding to attract large firms. Policy efforts that are neutral in orientation – such as physical infrastructure investments or improving the generation and dissemination of knowledge – may be more effective alternatives.
Hans-Werner Sinn, Gerlinde Sinn, 09 November 2009
Twenty years after the fall of the Berlin wall, Germany’s political unification has succeeded. This column argues that its economic unification has not – East German growth has been very disappointing and pulled down the economy as a whole. It blames policies that raised East German wages above market levels.