The division of Germany after World War II provides a natural experiment for examining the impact of different political and economic systems. The country was split into two distinct entities: East Germany, characterized by Communist Party rule and central economic planning, and West Germany, which adopted democracy and capitalism. This situation allowed for the study of the causal relationship between these institutional differences and the divergent economic growth paths that followed in the two regions.

Divided Germany: A Natural Experiment on Capitalism and Central Planning

A key historical event where Winston Churchill delivered a speech that framed the post-World War II division of Europe. This speech provides important context for understanding the 'Divided Germany' natural experiment, as the phrase 'Iron Curtain' became a symbol of this separation.

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To cite the ebook, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/.

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