Working Paper No. 2424
Was Germany ever United? Evidence from Intra-and International Trade 1885 - 1933
When did Germany become economically integrated? Within the framework of a gravitymodel, based on a new data set of about 40,000 observations on trade flows within and acrossthe borders of Germany over the period 1885 – 1933, I explore the geography of trade costsacross Central Europe. There are three key results. First, the German Empire before 1914 wasa poorly integrated economy, both relative to integration across the borders of the Germanstate and in absolute terms. Second, this internal fragmentation resulted from culturalheterogeneity, from administrative borders within Germany, and from geographical barriersthat divided Germany along natural trade routes into eastern and western parts. Third, internalintegration improved, while external integration worsened after World War I and again withthe Great Depression, in part because of border changes along the lines of ethno-linguisticheterogeneity. By the end of the Weimar Republic in 1933, Germany was reasonably wellintegrated.JEL Code: F15, N13, N14, N90.Keywords: Germany, economic integration, aggregation bias, border effects.
Nikolaus Wolf Department of EconomicsUniversity of Warwick Coventry, CV4 7ALUnited Kingdomnikolaus.firstname.lastname@example.org
The author gratefully acknowledges financial support form the Fritz Thyssen foundation,Cologne, and excellent research assistance from Katja Bruisch, David Stenzel, and Hans-Christian Heinemeyer. Thanks to participants of the Berlin Colloquium, the Verein fuer Socialpolitik, Munich 2007, and seminar participants in Zurich, Warwick, Barcelona andelsewhere, especially Stephen Broadberry, Nicholas Crafts, Volker Nitsch, Dennis Novy,Stephen Redding, Albrecht Ritschl, Daniel Sturm, Ulrich Woitek, and Fabrizio Zilibotti. Allerrors are of course my own.