Veblen, Myrdal, and the Convergence Hypothesis: Toward an Institutionalist Critique
John B. Hall, Udo Ludwig
Journal of Economic Issues,
2010
Abstract
An Institutionalist critique that draws from selected contributions of Veblen and Myrdal initiates a convergence debate. Challenged is a Neoclassical interpretation of economic processes expected to lead toward a catching up with respect to per capita output of Germany's poorer eastern region with the richer western region. Economic method is considered, and the Institutionalist School of Thought rooted in contributions of Veblen as well as Myrdal is touted for offering higher levels of explanatory power than the Neoclassical School. We challenge the usefulness of laws in Economic Science, and especially their applicability to the empirical economy. Instead of automatic forces driving a meliorative trend, we seek to establish that human agency and policy play determining roles in affecting economic and societal outcomes in Germany's eastern region.
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Human Capital in a regional Comparison of East and West Germany: Catching up of the New Laender
Maike Irrek
Wirtschaft im Wandel,
No. 7,
2010
Abstract
The endowment with human capital is not only a factor that strongly influences the region’s current economical potential, but also has a considerable effect on its future economical potential, i.o.w. economic growth. Human capital describes the employable peoples’ skills and their personal knowledge, which can be used in the production of goods and services as well as in the further development of them.
The public debate about East Germany’s economic development is referring to this crucial relation when exposing the problems of the medium-term development of the supply of professionals or the firm’s research- and development intensity. For a better assessment of the situation on the aggregation level of the New Laender this article attempts to estimate the human capital endowment and its evolution over time in comparison to West Germany.
The average human capital of the employed persons and the labour force potential is estimated by means of the earned income for East and West Germany separately. As a result the average human capital of the employed persons can be shown to have risen slightly from 1995 to 2004 in East Germany while there is nearly no increase in West Germany. This may be considered as a catching-up process, without already having led to equalization.
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Is East Germany Catching Up? A Time Series Perspective
Bernd Aumann, Rolf Scheufele
Post-Communist Economies,
2010
Abstract
This article assesses whether the economy of East Germany is catching up with the West German region in terms of welfare. While the primary measure for convergence and catching up is per capita output, we also look at other macroeconomic indicators such as unemployment rates, wage rates and production levels in the manufacturing sector. In contrast to existing studies of convergence between regions of the reunified Germany, our approach is based purely upon the time series dimension and is thus directly focused on the catching up process in East Germany as a region. Our testing set-up includes standard ADF unit root tests as well as unit root tests that endogenously allow for a break in the deterministic component of the process. We find evidence of catching up for East Germany for most of the indicators. However, the convergence speed is slow, and thus it can be expected that the catching up process will take further decades until the regional gap is closed.
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Die ostdeutschen Städte und speziell Leipzig im deutschen Städtesystem
Peter Franz
Stadt Leipzig (Hrsg.),
2010
Abstract
In the pre-World-War-II era many East German cities held prominent positions within the national German system of cities. 20 years after the German unification we can strike an interim balance concerning these cities’ process of repositioning. For this purpose the 13 largest East German cities – including Leipzig, but without Berlin - are compared with cities of similar size in three West German regions (South, North, Center represented by North-Rhine/Westphalia). The indicators chosen rely to the cities’ economic and fiscal conditions. The indicators paint a differentiated picture: The average income per capita is in the East German cities still lower as in the West German cities; and the unemployment rates are still above the West German level. With respect to future growth potential the East German cities show a relatively good endowment with public universities and research institutions. In spite of the diverse depicted economic problems still to be solved the East German cities over the years have shown impressive endurance in catching-up.
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The Long Way to Convergence
Rolf Scheufele, Udo Ludwig
Wirtschaft im Wandel,
20 Jahre Deutsche Einheit - Teil 1 -
2009
Abstract
After nearly 20 years of economic development in unified Germany, East German states compared to the West German Leander still lag behind in terms of welfare. During the years immediately following unification, East Germany displayed high economic growth, but lost its relative strength largely in recent times. Therefore, this paper asks whether East Germany is still catching up in terms of per capita output. By considering the cross- section of German states, one can estimate an average convergence speed of approximately 2% per year. However, this catching-up process is partly driven by demographic effects and by migration from East to West Germany. If one considers a time series test of convergence, a catching-up process can still be identified, although the speed is lower and estimated to be around 1%. This implies that the convergence process of East Germany will need further decades until the regional gap will be closed.
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East German Exports: Remarkable Catch-up, but Still Lagging Behind
Götz Zeddies
Wirtschaft im Wandel,
20 Jahre Deutsche Einheit - Teil 1 -
2009
Abstract
German reunification entailed severe adjustment processes in East German export industries. With political and economic transition in Eastern Europe, at that time the main export market for East German producers, export demand initially collapsed in the early 1990s. Additionally, the introduction of the Deutschmark in Eastern Germany amounted to a massive revaluation, and international competitiveness of East German producers deteriorated. However, manufacturers in the New Federal States opened up new markets, especially in Western Europe and the Americas. As a consequence, after the downturn of construction activity and investment in the mid-1990s, international trade became the driving force of GDP-growth in Eastern Germany. Although since then, goods exports of the New Federal States grew twice as much as those of Western Germany, export ratio (goods exports as a percentage of GDP) only amounts to 22 per cent in Eastern Germany, compared to 42 per cent in the western part of the country. Even in comparison to Eastern European countries in transition, openness to trade of the New Federal States is still comparatively low. As an empirical analysis shows, this must be largely traced back to smaller firm sizes in the New Federal States as well as to the lower importance of manufacturing industries, which are traditionally more export-oriented. Moreover, East German manufacturers largely specialized on intermediate inputs, which are supplied to final assembly lines in Western Germany, but are not recorded as exports. Thereby, East German export performance is considerably underestimated.
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Is East Germany Catching Up? A Time Series Perspective
Bernd Aumann, Rolf Scheufele
IWH Discussion Papers,
No. 14,
2009
Abstract
This paper assesses whether the economy of East Germany is catching up with the
West German region in terms of welfare. While the primary measure for convergence and catching up is per capita output, we also look at other macroeconomic indicators such as unemployment rates, wage rates, and production levels in the manufacturingsector. In contrast to existing studies of convergence between regions of reunified Germany, our approach is purely based upon the time series dimension and is thus directly focused on the catching up process in East Germany as a region. Our testing setup includes standard ADF unit root tests as well as unit root tests that endogenously allow for a break in the deterministic component of the process. In our analysis, we find evidence of catching up for East Germany for most of the indicators. However, convergence speed is slow, and thus it can be expected that the catching up process will take further decades until the regional gap is closed.
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European Commission, Leibniz Association and IWH Discuss Innovation Related Policy in Transitions Regions
Björn Jindra, Katja Wilde
Wirtschaft im Wandel,
No. 7,
2009
Abstract
On February 17, 2009, the Halle Institute for Economic Research (IWH) and the Leibniz Association (WGL) held the final conference of the EU-project “Understanding the Relationship between Knowledge and Competitiveness in the Enlarging European Union” (U-know) in Brussels. The research dealt with systemic aspects of innovation and knowledge transfer as well as the development of R&D (research and development) and innovation related policy. Thereby, a particular emphasis was put on the challenges facing the new EU member states and East Germany. The research project proved to be very productive with 54 research papers in refereed journals as well as 33 articles in edited volumes.
The aim of the conference was to present and discuss the main results of the U-know project with experts from the industry as well as the political and scientific community. Within four parallel sessions (Enterprises and markets, Public science and industry links, Systems and governance, Role of institutions), research output was presented. Representatives of the EU Commission commented directly on the presentations with a view on policy implications. In a final panel, all participants underlined the increasing importance of education, R&D, and innovation related policy to support the competitiveness of the EU-15 countries as well as the catching-up process of the new EU member states. The conference has raised significant interest both within the scientific community and the EU Commission.
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East German Innovation System attractive for Foreign Investors
Jutta Günther, Björn Jindra, Johannes Stephan
Wirtschaft im Wandel,
No. 1,
2008
Abstract
Foreign direct investment (FDI) plays an important role in the catching-up process of East Germany due to direct employment- and demand related effects. However, this article takes a technological perspective on FDI in East Germany. It considers technological activities of foreign investors (R&D and innovation) and asks to what extent these are integrated into the East German innovation system. In other words, do foreign investors interact technologically with domestic enterprises and scientific institutions? So far, there seems to be a striking absence of empirical evidence on this issue. The basis for our analysis is recent data from a representative survey of foreign direct investors in East German manufacturing completed in 2007. The findings show that on average foreign investors are more R&D and innovation intensive compared to the total of East German manufacturing. In addition, their technological activities are by no means isolated from the East German innovation system. Foreign subsidiaries seem to benefit from East German customers, suppliers and especially scientific institutions with regard to locally conducted R&D and innovation. Contrary to existing assumptions the East German innovation system seems to be particularly attractive for the most technologically active foreign subsidiaries. This could constitute a major locational advantage for FDI in East Germany over Central and East Europe. However, the technologically active foreign investors believe that only East German suppliers are able to benefit from their technological cooperation. The same cannot be said about East German customers or competitors. Thus, the potential for technological externalities from FDI in East Germany seems still to be limited.
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Innovations as driving force of the knowledge society – concepts and contemporary theoretical approaches
Jutta Günther, Björn Jindra
Wirtschaft im Wandel,
No. 9,
2007
Abstract
In response to the question what secures Europe’s future competitiveness, it is often in the context of “knowledge society” referred to location advantages for research and development (R&D), innovation and knowledge. Respective point of view is not only represented by decision makers of high-duty industrial countries, but also by so called catching up economies in Central and Eastern Europe as well as Asia. The present article deals against the background of current innovation theoretic approaches with the question of what indeed constitutes the abstract notion of the knowledge society, which actors play a role and how R&D and innovation are geographically distributed. Systemic approaches are outlined, which place emphasis on the relation among different knowledge generating actors, in particular among science and economy. In effort to elucidate the geographical distribution of R&D and innovation the authors refer to the regional economic theory, which constitute the reasons why such processes are marked by spatial concentration. Thereby, the hypotheses are competing in associating the spatial concentration with either sectoral specialization or diversification. The article shows the domination of multinational companies of research and development (R&D) in the private sector and that these businesses connect regional centers of innovations beyond national borders. Based on the theory of technological accumulation and internationalization of companies, the globalization of R&D and innovation processes are explained. Thereby, it must be recognized that a hierarchy of regional innovation systems is emerging in which the disparities are increasing both at home and abroad.
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