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American Economic Review: Vol. 98 No. 5 (December 2008)

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The Costs of Remoteness: Evidence from German Division and Reunification

Article Citation

Redding, Stephen J., and Daniel M. Sturm. 2008. "The Costs of Remoteness: Evidence from German Division and Reunification." American Economic Review, 98(5): 1766-97.

DOI: 10.1257/aer.98.5.1766

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 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. (JEL F15, N94, R12, R23)

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Authors

Redding, Stephen J. (London School of Economics)
Sturm, Daniel M. (London School of Economics)

JEL Classifications

N94: Regional and Urban History: Europe: 1913-
R12: Size and Spatial Distributions of Regional Economic Activity
R23: Urban, Rural, and Regional Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics


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