The East-West-German Productivity Gap: Lessons from Firm-level Data?
Steffen Müller
Wirtschaftsdienst,
Konferenzband "30 Jahre Deutsche Einheit", März
2021
Abstract
According to national accounts, the East German economy is at only 80 % of West German labour productivity even 30 years after the fall of the Iron Curtain. This difference in aggregate labour productivity goes hand in hand with many of the economic and societal problems East Germany faces today. To understand the sources of the aggregate productivity gap, this study discusses recent literature on the East-West gap that applies granular firm and product level data. The evidence clearly shows the relevance of firm-level productivity differences for the aggregate gap and challenges common hypotheses derived from aggregate data.
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30 Years after Reunification, Gross Domestic Product has Served its Purpose as an Indicator
Oliver Holtemöller
Wirtschaftsdienst,
Konferenzband "30 Jahre Deutsche Einheit", März
2021
Abstract
The comparison of living conditions in East and West Germany is often based on the gross domestic product per inhabitant. However, this measure is not a good welfare indicator in itself. It can be assumed that, measured by the gross domestic product per inhabitant, there will be no further significant equalisation of economic power in East and West Germany in the foreseeable future. This is because the age structure of East Germany, i.e. the ratio of employed persons to inhabitants, is less favourable than in the West. On the other hand, if one looks at important welfare indicators such as consumption opportunities, life expectancy, leisure time and income inequality, living conditions in East and West Germany are more similar than the gross domestic product per inhabitant suggests. In the debates on the catching-up process of East Germany, more emphasis should therefore be placed on labour productivity as a measure of economic strength and on welfare indicators as a measure of the equalisation of living conditions.
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14.10.2020 • 21/2020
Recovery Loses Momentum ‒ Economy and Politics Still Shaped by the Pandemic
The corona pandemic leaves substantial marks in the German economy and its impact is more persistent than assumed in spring. In their autumn report, the leading German economic research institutes have revised their economic outlook downwards by roughly one percentage point for both this and next year. They now expect gross domestic product to fall by 5.4% in 2020 (previously -4.2%) and to grow by 4.7% (5.8%) in 2021 and 2.7% in 2022.
Oliver Holtemöller
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17.06.2020 • 10/2020
High risk of corporate bankruptcy due to the corona shutdown
The Corona shutdown increases the probability of corporate bankruptcy. An analysis based on corporate financial statements from 2014 to 2018 reveals that in the United Kingdom, 73% of shutdown firms are not able to cover interest expenses from earnings before interest and taxes if they lose one twelfth of annual turnover. In Germany, the fraction amounts to 81%.
Oliver Holtemöller
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The Economic Development of Saxony-Anhalt since 1990
Oliver Holtemöller, Axel Lindner
Abstract
This article describes the economic development of Saxony-Anhalt since 1990 in the context of the East German transition from a centrally planned economy to a market economy. In the early 1990s the economy of Saxony-Anhalt caught up quickly with West Germany, mainly because the capital stock was modernized and expanded. Convergence, however, has almost come to a halt for some time now and gross domestic product per employed person is still about 20% below the West German level. The challenge for economic policy is to further the catching-up process by fostering research and innovation and improving the skills of the workforce.
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Polen vor der Middle-Income-Trap? Entwicklungsplan bis 2030 soll
den Aufholprozess beschleunigen
Oliver Holtemöller, Martina Kämpfe
Wirtschaft im Wandel,
No. 4,
2017
Abstract
Polen hat seinen Abstand gegenüber den entwickelten Marktwirtschaften Westeuropas seit dem Beginn der 1990er Jahre bis heute gemessen am Pro-Kopf-Einkommen stark verringert. Galt das Land in den ersten zwei Jahrzehnten unter den mittelosteuropäischen Ländern als Vorreiter beim Wirtschaftswachstum, so hat sich das Aufholtempo in den letzten Jahren verlangsamt. Die polnische Regierung reagierte darauf mit einem strategischen Entwicklungsplan („Morawiecki“-Plan), der Maßnahmen und Ziele bis 2030 benennt und Polens Aufholprozess neuen Schwung verleihen soll. Für das wirtschaftsliberale Reformland bedeutet mehr staatlich gesteuerte Wirtschaftsplanung allerdings einen Paradigmenwechsel. Vom Erfolg dieser Strategie hängt es ab, ob Polen den Übergang in die zweite, innovationsorientierte Phase des Aufholprozesses schafft oder längerfristig auf dem bisherigen Niveau zu verharren droht.
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29.09.2016 • 40/2016
Joint Economic Forecast: German Economy on Track – Economic Policy needs to be Realigned
Thanks to a stable job market and solid consumption, the German economy is experiencing a moderate upswing. The GDP is expected to increase by 1.9 percent this year, 1.4 percent in 2017, and 1.6 percent in 2018, according to the Gemeinschaftsdiagnose (GD, joint economic forecast) that was prepared by five of Europe’s leading economic research institutes on behalf of the Federal Government. The most recent GD, which was released in April, predicted a GDP growth rate of 1.6 percent for 2016 and 1.5 percent for 2017.
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Musterknabe Osteuropa: Subventionskontrolle und staatliche Beihilfen
Jens Hölscher
Wirtschaftsdienst,
No. 5,
2014
Abstract
Ten years after the biggest enlargement in the history of the EU, the integration of the new member states is assessed positively. It is considered an economic success when looking at the income levels. However, due to overly optimistic assumptions and the crisis, economic integration and the catching-up process will take much longer for the new EU member states than originally expected. Moreover, new challenges are looming, especially as the Central and Eastern European accession countries adopt the euro. Smaller countries introduced the euro as quickly as possible, whereas larger countries have been much more hesitant, thinking twice not only because of several unsolved problems in the euro area but also because they use the exchange rate tool much more intensively. All new member states have to make sure they continue to increase their productivity and competitiveness. Findings suggest that after having entered the EU, the new eastern member states appear to have been developing rather stringent competition cultures. Bulgaria and Romania’s transition performance significantly differs from the pattern in the 2004 accession countries, both in terms of quantitative growth and institutional quality. These countries show that EU funds can be highly counter-productive since they help to conserve old structures.
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New Tendencies in Competition Between Cities and Regions: Empirical Results from Case Studies in Germany and Austria
Martin T. W. Rosenfeld
Economy and Geography,
2013
Abstract
It is often discussed that during the last decades, due to several new developments, locational competition at the local and regional scale has changed its appearance and has increased significantly, all over Europe. Modern economic theories are suggesting that some locational factors have become more important than in previous times and might have led to changing conditions for the competition between cities and regions. The intention of the paper is to bring more light into this discussion and to illustrate, with the help of case studies, whether locational competition has really become more intensive, and / or whether new categories of competition have evolved.
The paper is based on the work of an interdisciplinary research group which was initiated and partially financed by the German National Academy for Spatial Research and Planning (Akademie für Raumforschung und Landesplanung, ARL). The paper’s first part is reporting on a survey of recent theoretical and empirical literature on locational competition and has the task to classify the new tendencies systematically. The second part of the paper is presenting the results of case studies, which were carried out in order to find out about the importance of the expected changes in selected cities and regions in Germany and Austria. The main findings may be characterized as follows. For several cities and regions, we found out that the decrease of transportation and transaction costs had positive impacts on local and regional development, as within these cities and regions, industries are concentrated which benefit from technologies which are connected to transportation or transaction costs. Also for some regions, a positive impact of the downsizing of administrative borders was found – although especially in Eastern Germany, the process of catching up was restrained by agglomeration economies in the West. Although the impact of the new categories of locational competition on the economic development of the case cities and regions was, overall, limited, there was an important impact on the creation of new strategies by local and regional policymakers.
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Investment Grants: Which Requirements Should be Fulfilled?
Mirko Titze, Lutz Schneider
Wirtschaft im Wandel,
No. 11,
2010
Abstract
Since the year 1969 the German government has applied investment grants to improve regional economic development of disadvantaged regions. The support of eligible firms shall enhance its investment activities. Such activities may force a sustainable development of the respective region. One requirement – amongst others – for the grant of this investment support scheme is the firm’s verification of supra-regional sales. The gains resulting from the firms’ export activities lead to additional income for that region, and this stimulates multiplicative (reinforcing) regional income processes. Since the German reunification this instrument has been applied in the new federal states, too. Due to the fact that structural deficits still exist in East Germany investment grants are adopted primarily in the new federal states. Today, some policy decision makers think that the catching-up process of disadvantaged regions is not fast enough. Against this background, the further application of investment grants is discussed controversially. Some criticism tends to the criterion of supra-regional sales. It has been argued that particularly small firms are excluded from this support scheme. However, small firms are considered as key players for regional economic activities. Moreover, firms which are highly integrated in international markets depend on world trade cycles and that might be risky for the respective region. Finally, critics believe that regional actors should be boosted in order to strengthen regional identities in terms of regional buyer-supplier-networks. This article shows that policy decision makers should maintain the criterion of supra-regional sales. Particularly, regions with a loss of inhabitants need gains from supra-regional sales to stabilise their local purchasing power. Otherwise, these regions are strongly dependent on transfer flows stemming from other regions. Beyond that, supra-regional sales indicate the firm’s international competitiveness. Finally, the most important argument for supra-regional sale might be linkages to supra-regional knowledge flows which strongly affect the region’s innovative capabilities.
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