A new study by the German Institute for Economic Research (DIW Berlin) reveals a complex picture of economic convergence and divergence within Germany. While eastern German states are steadily closing the gap with their western counterparts in terms of financial strength and economic output, a widening disparity is emerging between the less prosperous states, both east and west and Germany’s economic powerhouses.
The research, reported by the Funke-Mediengruppe newspapers, highlights that 35 years after reunification, the economic and financial capabilities of eastern states remain below the national average. However, these states have made significant progress, narrowing the gap with the weaker western states. The Saarland, for instance, now exhibits a lower economic standing than Brandenburg and the difference between eastern states and Lower Saxony is diminishing. Brandenburg is benefiting from its proximity to Berlin, attracting both residents and expanding its tax base, while Saxony has also seen a notable increase in its financial capacity.
Despite these gains, the study warns of a growing divide between the eastern and western states that are still catching up and the wealthier states like Bavaria, Baden-Württemberg, Hessen and Hamburg. The report suggests this trend is likely to persist, potentially requiring increased financial transfers between states and signaling a shift away from a traditional urban-rural divide towards a growing regional economic inequality.
Conversely, a separate DIW study reveals a significant reduction in the productivity gap. In 1991, productivity in eastern states was only about half that of the national average; today, it stands at approximately 90 percent. Notably, eastern Germany has made considerable strides in sectors involving personal services, such as education, healthcare and public administration, with productivity in these areas now exceeding that of western Germany.
