Openness and Growth: The Long Shadow of the Berlin Wall

Article dans une revue: The question whether international openness causes higher domestic growth has been subject to intense discussions in the empirical growth literature. This paper addresses the issue in the context of the fall of the Berlin wall in 1989. We analyze whether the slow convergence in per capita incomes between East and West Germany and the lower international openness of East Germany are linked. We address the endogeneity of openness by adapting the methodology proposed by Frankel and Romer (1999) to a panel framework. We instrument openness with time-invariant exogenous geographic variables and time-varying exogenouspolicy variables. We also distinguish the impact of different channels of integration. Our paper has three main findings. First, geographic variables have a significant impact on regional openness. Second, controlling for geography, East German states are less integrated into international markets along all dimensions of integration considered. Third, the degree of openness for trade has a positive impact on regional income per capita.

Auteur(s)

Claudia Buch, Farid Toubal

Revue
  • Journal of Macroeconomics
Date de publication
  • 2009
Mots-clés JEL
F2 F4
Mots-clés
  • Growth
  • German re-unification
  • Openness
Pages
  • 409-422
Version
  • 1
Volume
  • 31