The profit elasticity of investment in West Germany and the investment diversion effects of unification

Geoffrey Pugh

Applied Economics Letters, 1998, vol. 5, issue 2, 97-99

Abstract: This paper estimates investment equations for pre-unification West Germany in which changes in profitability have strong explanatory power with respect to changes in real investment. Accordingly, post-unification decline in profitability suggests that investment by west German firms in eastern Germany entailed investment diversion. In addition, we explain how we calculate t-statistics for long-run coefficients arising from Almon lag and partial adjustment models.

Date: 1998
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DOI: 10.1080/758523512

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