Geoscience Reference
In-Depth Information
hamburg
hamburg
bremen
hesse
byern
bremen
hesse
byern
bwutt
bwutt
nrw
schleswi
nrw
berlin
schleswi
rheinpa
lowsax
rheinpa
lowsax
brand
thur
sax afifi
meck
4
6
8 10
Unemployment Rate
12
14
5
10
15
20
Unemployment Rate
FIGURE 6.1. The Geography of Unemployment before and after Reunification
geography and, as a result, a much more probing test of the design of its fiscal
structure.
THE IMPACT OF REUNIFICATION ON GERMANY'S
ECONOMIC GEOGRAPHY
Triggered by processes exogenous to the existing fiscal structure of the Federal
Republic (see
Chapter 3
), the political reunification of the East and the West
involved a major alteration of Germany's economic geography and political
landscape. It implied both a sudden increase in regional disparities and a huge
financial burden on western l ander and the Federation. In economic terms, one
simple data point goes a long way in capturing the scope of the economic gap
between the old and new members of the federation: “in 1991 the GNP per
capital in the new Eastern Lander was 30% of that of the Western l ander”
(Renzsch
1998
: 127). Accordingly, the GDP per capita of the newly unified
Germany in 1991 was approximately 85%of that of the old Germany (Renzsch
1995
: 167-195). As a result of this incorporation, in political terms, a poorer
government was in charge of meeting a steep increase in the demand for services
and income transfers.
A process like Reunification produced a set of economic and political events
that relate directly to the parameters of the analytical model in this topic.
Figures 6.1
and
6.2
tap a bit more closely into these effects.
Figure 6.1
plots the
level of state GDP per capita against the state's unemployment rate, again before
and after October 1990. In turn,
Figure 6.2
presents four panels capturing
the geography of income and income redistribution in Germany at two specific
moments: 1989, immediately before Reunification took place; and 1994,the
first year for which I had access to household income data comparable to those
of 1989 (LIS data). The panels relate the l anders' GDP per capita (expressed
in constant euros from 1995) to their levels of market and disposable income
