Divergent Staaten

While on the subject of economic convergence and divergence, I thought it would be interesting to look at Germany. Since reunification, Germany has been marked by the stark economic differences between eastern and western Germany. During their time as separate states, West Germany greatly out paced East Germany in economic growth.

Since reunification though, the German government has poured tons of resources into the eastern Staaten, hoping to bring about a convergence. So far success has been limited. At first, they thought they could pay for reunification through the privatization of East German factories, but they turned out to be in such bad shape they were essentially given away. When replacing the East German currency, the government gave a highly favorable exchange rate, in an effort to increase wealth. However, this ended up inflating labor costs, which led to persistent unemployment. A massive investment in construction proved fruitless as the population continued to decline, leaving many disused buildings.

However, the government learned much from these early efforts, and with the recent growth of the Germany economy, one would hope that some convergence has occurred. Unfortunately, I can't find an comparison of incomes over a long enough period of years to determine if there has been a convergence in that area. An article from Spiegel says that in 20 years, household incomes in the east went from 35% to 53% of that in the west.
I have more complete data on unemployment though.
Instead of there being a more immediate convergence, there was a divergence in unemployment rates up until 2001, and the unemployment rate didn't peak until 2005. However, since then, the drop in unemployment in the east has outpaced the west.

Another chart I find interesting is comparing the number of unemployed people for each job vacancy.

After a massive spike in 2004, the number of job vacancies in eastern Germany greatly increased. So it appears, at least in terms of employment figures, eastern Germany didn't begin to converge with the west until around 2005, when Germany's economy started to improve.

While doing this research, I found one interesting article that now I can't find, wherein it concluded that attempts to compare the economies of the west and the east were flawed as the east is more rural. While the largest city in Germany, by far, is Berlin, all other cities in the top 10 are in western Germany. When compared to just rural areas in the west, the level of convergence is much higher. It's just that recent economic growth in Germany has mostly taken place in the cities, which the east is lacking.