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Cambridge Journal of Economics Advance Access originally published online on March 16, 2006
Cambridge Journal of Economics 2006 30(6):941-953; doi:10.1093/cje/bel001
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© The Author 2006. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Article

Economic convergence across German regions in light of empirical findings

John B. Hall and Udo Ludwig*

* Portland State University, USA, and Institute for Economic Research of Halle, and Department of Economics, University of Leipzig, respectively

Address for correspondence: John B. Hall, Department of Economics and International Studies, Portland State University, USA; email: hallj{at}pdx.edu

Abstract

This paper challenges the convergence hypothesis advanced by R. Barro and X. Sala-i-Martin as it is applied to explain the forces behind, patterns exhibited by and time line for German regional convergence. Exposed in some detail are the spurious neoclassical and marginalist assumptions, purporting that ‘automatic’ forces would indeed bring about a convergence in per capita incomes between two German regions. A trend exhibiting slow growth in per capita income in Germany's eastern region renders a Beta coefficient so low as to rule out convergence altogether. In addition, capital fails to move between German regions in the pattern assumed by the convergence hypothesis.

Key Words: Convergence hypothesis • Neoclassical theory • Regional development • Transition • Germany

JEL classifications: B13, P17, P27, P40, R11

Manuscript received September 27, 2004; final version received August 30, 2005.


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