The Rise and Decline of the East German Economy, 1949-1989

Ulrich Blum () and Leonard Dudley

Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ

Abstract: Why do some organizations decline while other do not? to study this issue , we introduce technological change into a theory of agency proposed by Laffont and Tirole. We show that the optimal organizational form for production depends on the estent of scale ecoomies and on the cost of monitoring workers. When the discrepancy between ideal and actual forms becomes too great, an organization's viability is threatened. We test this structuralist hypothesis for East and west Gemany over the 1949-1989 period. east Germany's relative decline is explained by an institutional structure the proved incompatible with technological change favoring smaller, flatter organizations.

Keywords: MORAL HAZARD; TECHNOLOGICAL CHANGE; ORGANIZATIONS (search for similar items in EconPapers)
Pages: 31 pages
Date: 1996
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Working Paper: The Rise and Decline of the East German Economy, 1949-1989 (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montec:9616

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