The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

German Reunification, Economics Of

  • Jennifer Hunt
Reference work entry


German reunification in 1990 posed the challenge of introducing markets to an economy with none. For citizens of the formerly Communist East Germany, the transition brought an immediate increase in political freedom and living standards, yet also a deep trough in output and persistent unemployment. I examine the reasons for the output trough and the subsequent labour market difficulties, analyse the impact of reunification on West Germany and Europe, and draw lessons for transition and economics generally.


‘Big bang’ reform Active labour-market programmes: in Germany Communism Czech Republic European Monetary Union (EMU) Exchange Rate Mechanism (ERM) (EU) German monetary union German reunification, economics of Investment subsidies: in Germany Labour productivity: in Germany Migration and labour markets Privatization: in Germany Trade unions: in Germany Transition Unemployment insurance: in Germany Unemployment: in Germany Wage floor theory Welfare state: in Germany 

JEL Classifications

O2 E6 J4 J6 P3 F3 P2 
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I am very grateful to Michael Burda, Wendy Carlin, Adam Posen and Harald Uhlig for helpful discussions, and to Karl Brenke, Michaela Kreyenfeld, Joachim Ragnitz and Werner Smolny for generously and quickly providing me with data.


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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Jennifer Hunt
    • 1
  1. 1.