Economic Freedom and Government Ideology Across the German States

Abstract

This paper examines whether government ideology influenced economic freedom across the German states. The results show that in former West Germany rightwing governments promoted economic freedom, whereas leftwing governments confined it. In former East Germany, however, rightwing governments have not been associated with propagating economic freedom. This finding appears to conflict with the common notion of policy convergence at the federal level. In fact, the observed variation in political preferences across states may indicate that politicians gratify the local electorate and, in return, offer moderate policies at the federal level.