Working Paper: CEPR ID: DP6796
Authors: Nikolaus Wolf
Abstract: This paper asks whether Germany was ever an economically integrated area. I explore the geography of trade costs in a new data set of about 40,000 observations on regional trade flows within and across the borders of Germany over the period 1885 ? 1933. There are three key results. First, the German Empire before 1914 was a poorly integrated economy, both relative to integration across the borders of the German state and internally. Second, this internal fragmentation had its origins in administrative borders within Germany, in a geographical barrier that divided Germany roughly along natural trade routes into east and west, and in a considerable cultural heterogeneity within Germany prior to 1919. Third, internal integration improved along with external disintegration in the wake of the war, partly due to border changes along the lines of ethno-linguistic heterogeneity and again with the Great Depression. By the end of the Weimar Republic in 1933, Germany was reasonably well integrated.
Keywords: aggregation bias; border effects; economic integration; Germany
JEL Codes: F15; N13; N14; N90
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Administrative borders (F55) | Trade (F19) |
| Cultural heterogeneity (Z19) | Trade (F19) |
| Pre-1914 fragmentation (N93) | Trade integration (F15) |
| Post-WWI border changes (F55) | Trade flows (F10) |
| End of Weimar Republic (N44) | Economic integration (F15) |
| Geographical barriers (R12) | Trade (F19) |