The effect of institutional differences on the economic development of German-speaking countries

Abstract

The growth rates and sustainability of economic development of five German-speaking countries: Austria, German Democratic Republic (GDR), Luxembourg, Federal Republic of Germany (FRG) and Switzerland in the period 1947-1990 are investigated. The comparison is carried out for five economic cycles of the united Germany over this period. The indicators of the standard deviation of the growth rates of real GDP and national income are used as a sustainability performance. It is revealed that the GDR’s institutional system showed in a sustained way high growth rates, and after the isolation of West Berlin – favorable risks and firmness of prices. This system may even be regarded as the best institutional model of economic development for the German nation. At the moment of accession into the blocs, the member countries of the military and political bloc obtained benefits of development; during the exacerbation of the military and political situation, Switzerland, which was far from the contact of the blocs, became the winner, and during the detente – border Austria. Countries with smaller economies demonstrated greater institutional mobility.