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The Macroeconomic Effects of German Unification: Real Adjustments and the Welfare State
- Source :
- Review of Economic Dynamics. 3(3):423-460
- Publication Year :
- 2000
-
Abstract
- We study the effects of German unification in a model with capital accumulation, skill differences, and a welfare state. We argue that this event is similar to a mass migration of low-skilled agents holding no capital into a foreign country. Absent a welfare state, we observe an investment boom, depressed output, and employment conditions. Capital owners and high-skilled agents are willing to give up to 4% of per-capita consumption to favor unification. When a welfare state exists the investment boom disappears and the recession is prolonged. Now, with unification, capital owners and high-skilled agents lose 4% of per-capita consumption. Journal of Economic Literature Classification Numbers: E32, E62, F22, H23.
- Subjects :
- Consumption (economics)
Economics and Econometrics
Labour economics
Unification
media_common.quotation_subject
jel:E62
jel:E32
Welfare state
Investment (macroeconomics)
Boom
Recession
jel:H23
jel:F22
Capital accumulation
Capital (economics)
Economics
German unification, capital accumulation, skill differences, credit constraints, the welfare state
media_common
Subjects
Details
- Volume :
- 3
- Issue :
- 3
- Database :
- OpenAIRE
- Journal :
- Review of Economic Dynamics
- Accession number :
- edsair.doi.dedup.....0d6baf893da5f206c7b3f179a313baea
- Full Text :
- https://doi.org/10.1006/redy.2000.0096