The Costs of Remoteness: Evidence from German Division and Reunification

66 Pages Posted: 11 Jul 2008

See all articles by Stephen J. Redding

Stephen J. Redding

Princeton University

Daniel M. Sturm

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 2005

Abstract

This paper exploits the division of Germany after the Second World War and the reunification of East and West Germany in 1990 as a natural experiment to provide evidence of the importance of market access for economic development. In line with a standard new economic geography model, we find that following division cities in West Germany that were close to the new border between East and West Germany experienced a substantial decline in population growth relative to other West German cities. We provide several pieces of evidence that the decline of the border cities can be entirely accounted for by their loss in market access and is neither driven by differences in industrial structure nor differences in the degree of war related destruction. Finally, we also find some first evidence of a recovery of the border cities after the re-unification of East and West Germany.

JEL Classification: F15, N94, O18

Suggested Citation

Redding, Stephen J. and Sturm, Daniel M., The Costs of Remoteness: Evidence from German Division and Reunification (August 2005). LSE STICERD Research Paper No. PEPP11, Available at SSRN: https://ssrn.com/abstract=1158333

Stephen J. Redding (Contact Author)

Princeton University ( email )

Princeton, NJ 08544-1021
United States

HOME PAGE: http://www.princeton.edu/~reddings/

Daniel M. Sturm

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany
+49 89 2180 1363 (Phone)
+49 89 2180 6227 (Fax)

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