Geoscience Reference
In-Depth Information
takes the value of 1 if both the regional and federal government are controlled
by the same party (or coalition) and 0 otherwise.
19
The results support the claim that federal authorities will concentrate their
efforts in those regions of the union with the highest levels of emigration to
other parts of the country. They also show that Kohl's government saw the East
as a critical area to secure its political survival, concentrating efforts especially
in those regions where the CDU managed to secure the regional government
early on in the process. The latter effect is captured by the significant differential
in resources accrued by those eastern l ander controlled by the CDU.
20
Overall,
the picture emerging from these results is one of a government pouring resources
into the East to stop the population outflow and to secure its own political
survival.
To summarize, the analysis of early responses to Reunification paints a pic-
ture in which federal elites engage in a massive increase of both interpersonal
and interregional redistribution towards the East. Political incentives associated
with centripetal representative institutions and economic incentives associated
with the risk of under-sided mobility patterns drove actors' initial strategies in
ways that lend support to the core argument in this topic. In turn, the massive
transfers towards the East channeled the distributive tensions emerging from
the new economic geography to the revenue side. The conflict was not about
the need or even the size of the effort at first, but about who was going to
meet the cost. Early on in the process, the net contributors to the FA in the
West managed to reallocate seats in the Bundesrat to protect themselves from
excessive extraction in the future. At the same time, when the federal govern-
ment tried to build a coalition of net contributors and eastern l ander at the
expense of those previously benefitting from the system, the efforts backfired.
The latter managed to exploit their role as colegislators in the Bundesrat to
protect their relative fiscal position vis-
`
a-vis the Bund. The federal government
and western tax payers (consumers) met the bulk of the unification effort. The
agreements reached in the Solidarity Pact appeased the distributive tensions
within the union, though not for long.
BEYOND NATIONAL UNITY: CENTRIPETALISM AND DISTRIBUTIVE
CONFLICTS AFTER REUNIFICATION (1995-2005)
The previous section has focused on the early response of Germany's fiscal sys-
tem to the challenges of Reunification. Taking advantage of the sudden trans-
formation of Germany's economic geography, I have been able to identify how
the centripetal nature of political institutions and the concerns about negative
19
The estimates reported include panel corrected standard errors with a Prais-Winsten correction
for serial autocorrelation.
20
Note that the effects are directly interpretable only because the two terms in the interaction
model are dummy variables. Also, I am reasoning on the premise that, given the small number of
observations, a 10% significance level is an acceptable threshold while interpreting the results.
