East German Labour Market
Hans-Ulrich Brautzsch
Wirtschaft im Wandel,
No. 11,
2008
Abstract
In the course of 2008, the situation on the East German labour market improved again. The registered unemployment declined significantly. On the one hand, this is due to the positive development of employment situation. On the other, labour supply decreased like in recent years. The underemployment rate is still about twice as high as in West Germany. In 2009, the situation on the East German labour market will hardly improve due to weak production growth.
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Firm Density in East Germany: Findings from the Business Register
Gerhard Heimpold
Wirtschaft im Wandel,
No. 10,
2008
Abstract
The contribution focuses on the business density in East Germany in comparison with West Germany. For the purpose of the investigation, a new information source was used – the so-called Business Register. Business density in East Germany is of relevance for two reasons: First, when the wall came down in 1989, the East German economy suffered from the lack of private firms. Second, after 2000, a gap in terms of work places is still existent. The empirical data on business density in East Germany do not reveal an unequivocal picture. Measuring business density by comparing the number of firms with the respective number of population reveals a gap in terms of the number of businesses per 10 000 inhabitants in East Germany. The gap is above average with respect to firms in the manufacturing sector, and it is particularly high regarding larger manufacturing firms. Measuring the business density as a quota of the number of firms and the volume of Gross Domestic Product (GDP) reveals a reverse picture: The business density in relation to GDP is on average higher in comparison with the respective value in West Germany. Maybe, the size of the East German market sets limits regarding the number of firms which may act there. However, the size of the domestic market is not so relevant for the firms belonging to the manufacturing sector and to the business-related services since they are expanding to a large extent due to their export activities. Though from the manufacturing sector, relativly positive development perspectives can be expected, the number of large firms per 10 000 inhabitants is relatively low in comparison with West Germany. Public support for strengthening the business landscape in the East German manufacturing sector remains on the agenda of economic policy in Germany.
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Der lange Schatten des Sozialismus: Folgen für die Wirtschaftspolitik in Ostdeutschland
Ulrich Blum
List Forum für Wirtschafts- und Finanzpolitik,
2008
Abstract
East Germany’s economy growth was not able to close, over the last ten years, the lag against the West German economy. This paper inquires into the economic reasons, especially those that can be traced in history. It is shown that the exodus of elites from what was Central Germany started in the 1930s because of the persecution of the Jewish elites. During the period after the Second World War until the construction of the wall in 1961 especially young and qualified people left the Soviet Zone and later the G.D.R. Thus, the elites destroyed in the Third Reich and the Second World War could not be replaced exogenously. In the 1970s, an inadequate economic system destroyed the still existing industrial middle class which was an important base of productivity and helped to generate foreign income because of its export intensity to the Western countries. This generated a current account crisis which was only overcome by a loan from West Germany, the so-called “Strauß-Kredit”. In 1988, however, the fundamental problems again became visible and enforced a change of the economic system. The privatisation strategy by the Treuhand by and large did not sell or restitute enterprises but sold plants out of the fragmented combines. Today, the visible deficit in headquarter function is the most important single obstacle against growth and wealth in the New Lander. It can be expected that this will only disappear within a new technology cycle.
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The Role of the Human Capital and Managerial Skills in Explaining the Productivity Gaps between East and West
Johannes Stephan, Wolfgang Steffen
Eastern European Economics,
No. 6,
2008
Abstract
This paper assess determinants of productivity gaps between firms in the European transition countries and regions and firms in West Germany. The analysis is conducted at the firm level by use of a unique database constructed by field work. The determinants tested in a simple econometric regression model are focussed upon the issue of human capital and modern market-oriented management. The results are novel in as much as a solution was established for the puzzling results in related research with respect to a comparison of formal qualification between East and West. Furthermore, the analysis was able to establish that the kind of human capital and expertise mostly needed in the post-socialist firms are related to the particular requirements of a competitive market-based economic environment. Finally, the analysis also finds empirical support for the role of capital deepening in productivity catch-up, as well as the case that the gaps in labour productivity are most importantly rooted in a more labour-intense production, which does not give rise to a competitive disadvantage.
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German Economic Growth in 2008: Temporary Slow Down
Wirtschaft im Wandel,
No. 4,
2008
Abstract
World economic growth has slowed in the first months of 2008. The main causes are the crisis in the US housing sector and the turmoil in the financial sector in general, the spreading expectation of a recession in the US, and sharply rising prices for energy and food. The German economy, though, is still expanding healthily, with strong investment and export activities. Private consumption, however, shrank at the end of 2007. In 2008, while favorable labor market conditions will improve job security and thus the propensity to consume, real incomes will not rise by much due to the risen inflation rate; consumption will again expand only modestly this year. A slower expansion of the world economy and the stronger euro will dampen exports and investment. All in all, growth will slow to (working-day adjusted) 1.2% in 2008. Chances are good that in the next year, after the negative shocks have faded out a bit, growth will be accelerating again. The East German Economy was on a lower growth path in 2006 and 2007 than the economy in the West, according to recently revised national accounts data. Industrial production, however, is more dynamic in the East. Unemployment rates will continue to decrease faster in the East: as in the rest of Germany, employment is growing, and, contrary to what happens in the West, the labor force is shrinking.
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The Role of the Human Capital and Managerial Skills in Explaining the Productivity Gaps between East and West
Wolfgang Steffen, Johannes Stephan
IWH Discussion Papers,
No. 11,
2007
Abstract
This paper assess determinants of productivity gaps between firms in the European transition countries and regions and firms in West Germany. The analysis is conducted at the firm level by use of a unique database constructed by field work. The determinants tested in a simple econometric regression model are focussed upon the issue of human capital and modern market-oriented management. The results are novel in as much as a solution was established for the puzzling results in related research with respect to a comparison of formal qualification between East and West. Furthermore, the analysis was able to establish that the kind of human capital and expertise mostly needed in the post-socialist firms are related to the particular requirements of a competitive marketbased economic environment. Finally, the analysis also finds empirical support for the role of capital deepening in productivity catch-up, as well as the case that the gaps in labour productivity are most importantly rooted in a more labour-intense production, which does not give rise to a competitive disadvantage.
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Research and Development: important source for product innovation also in East Germany
Jutta Günther, François Peglow
Wirtschaft im Wandel,
No. 9,
2007
Abstract
The development and successful introduction of new products is a fundamental feature of a modern knowledge society. After completion of the retrieving technological renewals in East Germany, businesses in the newly-formed German states have to stand up to the competition for marketable concepts and ideas. In doing so, the structural particularities on the strength of transformation are still in force and besides, the embedding of East Germany between high-tech in the West and catching up countries in the East constitutes an additional challenge. This article outlines the innovation activities of East German companies and pursues in the framework of an multivariate analysis to follow up intra-corporate determining factors for product innovations The empirical analysis, employing the IAB establishment panel, shows an active share of innovation participation of companies belonging to the manufacturing industry in East Germany during the years 2002 and 2003. The proportion of companies with product innovation in the newly-formed German states even lies slightly above the reference value for West Germany. Especially companies with an own Research and Development (R&D) department are introducing new products twice as much as companies without an R&D division. The regression analysis proves that own R&D represents the strongest driving force for product innovations in regard to input factors. Moreover, continuing operational education can also be attested a positive impact on innovation activities and emphasizes concurrently the meaning of long-life learning. In reference to business specific characteristics, it stands out that foreign equity participation imposes a significant negative impact of on product innovations. This result, deserving further analysis, indicates the phenomenon of so-called subcontracting.
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East German Economy: Demand Push Stronger than Structural Deficiencies
Wirtschaft im Wandel,
No. 7,
2007
Abstract
In 2006, growth of production was surprisingly strong in Eastern Germany. The structural deficiencies there would have suggested a slower pace. In particular, linkages with national and international business cycles have been underestimated. To a large part, the reason why output grew by 3 per cent did not come from Eastern Germany itself, but from the Old Länder and from abroad. In the New Länder, the strong upward swing in investment activity stimulated the economy. However, owing to a small increase in total income of private households, their purchasing power lagged behind.
The improved ability of East German firms to absorb cyclical impulses from exports and from Germany’s general investment activity proved to be a crucial factor. In particular, the endowment of workplaces with modern production facilities as well as the continued reduction in the disadvantages with respect to cost-competitiveness in the tradable goods sector were beneficial. The labour cost advantage compared to West German competitors increased further while the disadvantage compared to those from Central and Eastern Europe decreased.
Benefiting from these factors, economic activity in Eastern Germany will grow faster than in the Old Länder as long as the upswing in Germany and abroad remains strong. In 2007 and 2008, investments – especially in equipment – and exports will be the driving forces again. For exports, the strongly expanding markets in Central and Eastern Europe as well as in Russia will gain in importance. As income and employment prospects improve, private consumption will support the growth in production. Registered unemployment should decrease below the 1-million threshold.
Manufacturing will remain the primary force of the upswing; its advantages in production costs will not vanish as long as, even in presence of scarcity of skilled labour, salaries and wages do not increase more than in Western Germany. In the wake of robust economic growth, the New Länder will make further progress in catching up with respect to production and income.
Companies will regain support from the banking industry. Yet, investment capital still stems from public funding programmes to a non-negligible extent. In the medium run, access to credit will ease as a result of further improvements in the firms’ net worth position. However, dependency on internal funds remains high and exposes companies to comparatively strong cyclical risks. In an economic downturn, the structural deficiencies of the East German economy will impair economic expansion.
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Wie hoch ist die Unterbeschäftigung in Ost- und Westdeutschland? Arbeitsplatzausstattung und Arbeitsplatzlücke nach Geschlechtern in Ost- und Westdeutschland
Hans-Ulrich Brautzsch, Johann Fuchs, Cornelia Lang
Wirtschaftspolitische Blätter,
No. 2,
2007
Abstract
The paper investigates the number and structure of available jobs by gender in East and West Germany, the gap between the supply and demand of jobs by gender in both regions and the reasons for the wider “job gap“ in East Germany compared with West Germany. The analysis shows no significant difference in the number of jobs per 1000 persons in working age between East and West Germany. For women, the East German economy offers more jobs. Nevertheless, the gap between labour demand and the supply of jobs is wider in East germany. This is caused not only by problems concerning the production structure, but also by the significantly higher participation rate of women in the labour market. Reasons are the traditional behaviour of East German women and - compared with West germany - the considerably lower household income.
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The East German Cement Cartel: Cartel Efficiency and Policy after Economic Transformation
Ulrich Blum
Eastern Economic Review,
2007
Abstract
In 2003 the German Antitrust Commission (GAC) proved the existence of a cartel in the German cement industry. The German cement producers involved in the case were fined € 661 million for having established quotas to extract additional rents. One of the main centers of this cartel was East Germany, where the East German Cement Combine with its giant facilities had been sold, in the early 1990s, to four large producers by Treuhand in the process of privatizing the economy. Only in respect to in this market did all defendants concede having had a part in forming a cartel.
In this paper, we challenge the argument of excess revenue that the GAC puts forward for the East German market. We argue that legal evidence does not necessarily translate into economic evidence. We show that demand for cement is realized in geographical and, to a more limited extent, in product space. Thus, in the absence of cartels we would expect monopolistic competition to prevail. We argue that any transition in the market regime, from the cartel to the post cartel period, must be traceable in the individual firm’s demand function which differs from the clients’ demand function because of costs for spatial and product differentiation. Within the framework of an econometric model, we cannot identify any structural changes in demand. Most likely, imports from Poland and the Czech Republic were dumped into the East German market and some medium sized producers were responsible for the cartel never working.
Finally the paper shows how difficult it is to generate competition in certain industries even under the umbrella of a well-established market economy, i.e. that of West Germany, and that the openness of the economy, i.e. trans-border shipments, are decisive.
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