Abstract

25 years after reunification, the East German economy has still not been able to catch up with West Germany. In order to handle the transformation process, considerable transfers were provided. We investigate whether structural weaknesses today can be traced back to production structures that existed at the end of the German Democratic Republic. Possibly, the preservation of industrial centers has prevented a more profound structural change towards knowledge-intensive services. In this respect, we also investigate the Transfer policies in East Germany which still focus on Investments in real capital.