Prices in the Two Germanies

Comparative evaluations across economic systems are often hampered by the typical valuation problem, that is, market prices have a different meaning than planned prices. This paper considers prices in the two Germanies and the widely accepted hypothesis that East German prices did not reflect relative scarcities as well as did West German prices. To test this hypothesis empirically, Seton's eigenprices are adopted as the standard of valuation. On the whole, the hypothesis is rejected in the sense that West German prices deviated from this standard of valuation by just as much as did East German prices. Closer inspection of the prices at the sectoral level provides an explanation for this unexpected result.J. Comp. Econom., March 1999, 27(1), pp. 131–149. University of Groningen, P.O. Box 800, NL-9700 AV Groningen, The Netherlands; and Frankfurt Institute for Transformation Studies, Europa–Universität Viadrina, P.O. Box 776, D-15207 Frankfurt/Oder, Germany