The Macroeconomic Effects of German Unification: Real Adjustments and the Welfare State
Fabio Canova () and
Morten Ravn ()
No 2038, CEPR Discussion Papers from C.E.P.R. Discussion Papers
We study the effects of German unification on macroeconomic variables in a model with capital accumulation, skill differences and a welfare state. The integration of two economies differing in capital holdings and skill distribution is similar to a mass migration of low-skilled agents holding no capital into a foreign country. In the absence of a welfare state, capital holders benefit over the business cycle and depressive long-run consequences ensue. With a welfare state depressive long-run effects are amplified. We examine two policies which may reduce the negative long-run effects. Open economy and sticky wages extensions are considered.
Keywords: currency parity; Redistribution; Subsidies; Tax Incentives; wage parity (search for similar items in EconPapers)
JEL-codes: B41 E32 (search for similar items in EconPapers)
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Journal Article: The Macroeconomic Effects of German Unification: Real Adjustments and the Welfare State (2000)
Working Paper: The macroeconomic effects of German unification: Real adjustments and the welfare state (2000)
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