Was Germany Ever United? Evidence from Intra- and International Trade, 1885-1933

When did Germany become economically integrated? Based on a large new data set on trade flows within and across the borders of Germany, I explore the geography of trade costs across Central Europe, 1885-1933. The key finding is that the German Empire before 1914 was a poorly integrated economy. This internal fragmentation resulted from cultural heterogeneity, from administrative borders, and from natural geography that divided Germany into eastern and western parts. After World War I and again with the Great Depression, internal integration improved, while external integration worsened in part because of border changes along the lines of ethnolinguistic heterogeneity. By the end of the Weimar Republic in 1933, Germany was reasonably well integrated.