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Shocks to the System: the German Political Economy Under Stress

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  • Wendy Carlin
  • David Soskice

Abstract

The German economy is recovering hesitantly from the sharp post-unification boom and recession. Two features of recent West German performance are novel: there has been an unprecedented loss of jobs in industry, and manufacturing profitability has been pushed to its lowest level ever and is now low relative to other OECD economies. Serious problems with labour costs and innovation would be expected to show up in a weakening in the trend of export performance. That this has not yet happened is the consequence of the existence of an apparently robust innovation system which enables companies to pursue high quality incremental innovation strategies. However, the experiment of transferring the West German model to the East has proved extremely costly and has not so far established the basis for self-sustaining growth. Problems in profitability, investment and employment in West Ger many reflect the failure of the bargaining system-unions, employers, Bundesbank and public sector—to negotiate the sharing of the burden of unification.

Suggested Citation

  • Wendy Carlin & David Soskice, 1997. "Shocks to the System: the German Political Economy Under Stress," National Institute Economic Review, National Institute of Economic and Social Research, vol. 159(1), pages 57-76, January.
    • Handle: RePEc:sae:niesru:v:159:y:1997:i:1:p:57-76
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    Cited by:

    1. Carlin, Wendy & Glyn, Andrew & Van Reenen, John, 2001. "Export Market Performance of OECD Countries: An Empirical Examination of the Role of Cost Competitiveness," Economic Journal, Royal Economic Society, vol. 111(468), pages 128-162, January.
    2. Ulman, Lloyd & Gerlach, Knut, 2003. "An essay on collective bargaining and unemployment in Germany," Institute for Research on Labor and Employment, Working Paper Series qt16v5m721, Institute of Industrial Relations, UC Berkeley.
    3. Fabio Canova & Morten Ravn, 2000. "The Macroeconomic Effects of German Unification: Real Adjustments and the Welfare State," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 423-460, July.
    4. Hancké, Bob, 1999. "Revisiting the French model: coordination and restructuring in French industry in the 1980s," Discussion Papers, Research Unit: Economic Change and Employment FS I 99-301, WZB Berlin Social Science Center.
    5. Szalavetz, Andrea, 2004. "Technológiai fejlődés, szakosodás, komplementaritás, szerkezetátalakulás [Technological development, technological complementarity and structural change]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 362-378.
    6. Lila J. Truett & Dale B. Truett, 2011. "Whither Germany and the EMU In a Challenging Environment?," Working Papers 0019, College of Business, University of Texas at San Antonio.
    7. Cusack, Thomas R., 1997. "On the road to Weimar? The political economy of popular satisfaction with government and regime performance in Germany," Discussion Papers, Research Unit: Economic Change and Employment FS I 97-303, WZB Berlin Social Science Center.
    8. Thorsten H. Block, 1998. "Financial Market Liberalization and the Changing Character of Corporate Governance," SCEPA working paper series. 1998-08, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    9. John Driffill & Marcus Miller, 2003. "No Credit for Transition: European Institutions and German Unemployment," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(1), pages 41-60, February.
    10. Ulman, Lloyd & Gerlach, Knut, 2002. "The Uneasy Triangle," Institute of European Studies, Working Paper Series qt2dd6z05p, Institute of European Studies, UC Berkeley.
    11. Crafts, Nicholas & Mills, Terence, 2001. "TFP Growth in British and German Manufacturing, 1950-96," CEPR Discussion Papers 3078, C.E.P.R. Discussion Papers.
    12. Beissinger, Thomas & Hellier, Joël & Marczak, Martyna, 2020. "Divergence in Labour Force Growth: Should Wages and Prices Grow Faster in Germany?," GLO Discussion Paper Series 620, Global Labor Organization (GLO).
    13. Steven Casper;Hannah Kettler, 2000. "The Road to Sustainability in the UK and German Biotechnology Industries," Monograph 000466, Office of Health Economics.
    14. Andrew Martin, 2000. "Social Pacts, Unemployment, and EMU Macroeconomic Policy," EUI-RSCAS Working Papers 32, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    15. Thomas R. Klassen & Steffen Schneider, 2002. "Similar Challenges, Different Solutions: Reforming Labour Market Policies in Germany and Canada during the 1990s," Canadian Public Policy, University of Toronto Press, vol. 28(1), pages 51-69, March.
    16. Annamaria Simonazzi, 2002. "Innovation and growth: supply and demand factors in the US expansion," Working Papers in Public Economics 53, Department of Economics and Law, Sapienza University of Roma.
    17. Michael Fichler, 1997. "Institutional transfer and the transformation of labour relations in east(ern) Germany: lessons for central and eastern Europe?," Transfer: European Review of Labour and Research, , vol. 3(2), pages 390-408, August.
    18. Guillaume Cléaud & Francisco de Castro Fernández & Jorge Durán Laguna & Lucia Granelli & Martin Hallet & Anne Jaubertie & Carlos Maravall Rodriguez & Diana Ognyanova & Balazs Palvolgyi & Tsvetan Tsali, 2019. "Cruising at Different Speeds: Similarities and Divergences between the German and the French Economies," European Economy - Discussion Papers 103, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

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