The Costs of Remoteness: Evidence from German Division and Reunification

The Costs of Remoteness: Evidence from German Division and Reunification

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 for the importance of market access for economic development. In line with a standard new economic geography model, we find that,...

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Bibliographic Details
Published in:The American economic review Vol. 98; no. 5; pp. 1766 - 1797
Main Authors: Redding, Stephen J., Sturm, Daniel M.
Format: Journal Article
Language:English
Published: American Economic Association 01-12-2008
Subjects:
Cities
Economic models
International trade
Market access
Modeling
Population growth
Simulations
Transportation costs
Urban populations
World wars
Online Access:Get full text
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Summary: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 for 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 close to the East-West German border experienced a substantial decline in population growth relative to other West German cities. We show that the model can account for the quantitative magnitude of our findings and provide additional evidence against alternative possible explanations.
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.98.5.1766