ABSTRACT
Privatization has been preceded by the transformation of the most important institutions of the economic system in Eastern Germany. The mandatory planning system and the administrative price system were abandoned; the Western German legal system was introduced; monetary reform entailed the introduction of a market-oriented monetary constitution; and private property rights to Eastern German business enterprises were guaranteed by transforming the legal system. This chapter examines first the transaction costs that result from the establishment of private property rights and free trade (5.1) and second investigates the effects of the transformation of the economic system and the accession of the former GDR to the Federal Republic’s economic and currency area on the production costs of Eastern German enterprises (5.2).
