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Why East Germany did not become a new Mezzogiorno

Andrea Boltho, Wendy Carlin () and Pasquale Scaramozzino

Journal of Comparative Economics, 2018, vol. 46, issue 1, 308-325

Abstract: Economic integration is generally thought to favour convergence in the economic performance of previously separated regions; but this is far from universally true, as the experience of the members of the Eurozone testifies. The paper considers the two sharply contrasting cases of East and West German convergence following reunification and the enduring poverty of the Italian Mezzogiorno since Italian unification a century and a half ago. In both countries, political integration delivers much higher consumption in the lagging relative to the leading region than of per capita GDP. Consumption convergence can be supported by transfers but ‘production’ convergence ultimately requires catch-up in the production of tradeables. The paper demonstrates the radically different performance of the tradeable sector in the two cases, and suggests that this may be the result of differences in labour market flexibility, in investment performance and in the social norms required for the production of complex manufacturing.

Keywords: Convergence; Tradeables; Labour market flexibility; Institutional quality (search for similar items in EconPapers)
Date: 2018
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Working Paper: Why East Germany did not become a new Mezzogiorno (2016) Downloads
Working Paper: Why East Germany did not become a new Mezzogiorno (2016) Downloads
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DOI: 10.1016/j.jce.2017.11.004

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