Ten years after the unification: East Germany and the relevance of modern theories of trade, location and growth

In the paper we analyse, ten years after the German unification, the relevance of modern theoretical developments on trade, location and growth for East Germany using sectoral and regional data. Given our discussion of stylized facts about industry growth, economies of scale and differences in labour productivity we test for the existence of localised knowledge spillovers and a spatial wage structure in East Germany. We find that localised knowledge spillovers play a role and that a spatial wage structure exists in East Germany.