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Explaining persistent unemployment in eastern Germany

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  • John Hall
  • Udo Ludwig

Abstract

Relatively high rates of persistent unemployment plaguing the eastern region of Germany are argued to be caused especially by two factors engendering slack labor demand relative to supply. Demand for East German labor declined as (1) rapid privatization was followed by cross-regional capital flows, resulting in high levels of capital intensity and a dramatic shedding of labor. Reindustrialization and service-sector expansion proved too weak to generate sufficient labor demand. (2) Related to privatization, business headquarters moved to the west of Germany, resulting in a notable pattern of reindustrialization and the eastern region's specialization in intermediates vis-à-vis finished goods, engendering weak labor demand.

Suggested Citation

  • John Hall & Udo Ludwig, 2007. "Explaining persistent unemployment in eastern Germany," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(4), pages 601-619.
    • Handle: RePEc:mes:postke:v:29:y:2007:i:4:p:601-619
    DOI: 10.2753/PKE0160-3477290404
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    Cited by:

    1. Christian Merkl & Dennis Snower, 2008. "East German unemployment: the myth of the irrelevant labor market," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 31(1), pages 151-165, September.
    2. Juan Carlos Martinez Oliva, 2009. "Riunificazione intertedesca e politiche per la convergenza," Mo.Fi.R. Working Papers 14, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.

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