@techreport{NBERw14553,
 title = "The Slow Decline of East Germany",
 author = "Harald Uhlig",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "14553",
 year = "2008",
 month = "December",
 URL = "http://www.nber.org/papers/w14553",
 abstract = {Fifteen years after German reunification, the facts about slow regional convergence have born out the prediction of Barro (1991), except that migration out of East Germany has not slowed down.  I document that in particular the 18-29 year old are leaving East Germany, and that the emigration has accelerated in recent years. I document that low wages, high unemployment and increasing reliance on social security persist across wide regions of East Germany together with these migration patterns.  To understand these patterns, I use an extension of the standard labor search model introduced in Uhlig (2006, 2008) by allowing for migration and network externalities.  In that theory, two equilibria can result: one with a high networking rate, high average labor productivity, low unemployment and no emigration ("West Germany'') and one with a low networking rate, low average labor productivity, high unemployment and a constant rate of emigration ("East Germany'').  The model does not imply any obviously sound policies to move from the weakly networked equilibrium to the highly networked equilibrium.},
}