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How Efficient is the East German Economy? An Exploration With Micro Data

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  • Michael Funke
  • Jörg Rahn

Abstract

The purpose of this paper is to evaluate the efficiency of the East German economy at the firm level using an unbalanced panel over the transition period 1994 to 1998. We adopt a translog stochastic frontier model to estimate technical efficiency in eastern and western Germany. The results indicate that firms in eastern Germany are significantly less efficient than firms in western Germany. The paper also examines some of the possible correlates of regional variations in firm-level efficiency.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2000/wp-cesifo-2000-12/cesifo_wp397.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 397.

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Date of creation: 2000
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Handle: RePEc:ces:ceswps:_397

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Keywords: East Germany; technical efficiency; panel data; convergence; wages;

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References

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  1. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
  2. Lambson, V.E., 1989. "Industry Evolution With Sunk Costs And Uncertian Market Conditions," Working papers 8904, Wisconsin Madison - Social Systems.
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  5. Burda, Michael C & Funke, Michael, 1993. "Eastern Germany: Can't We Be More Optimistic?," CEPR Discussion Papers 863, C.E.P.R. Discussion Papers.
  6. Carlin Wendy & Mayer Colin, 1995. "Structure and Ownership of East German Enterprises," Journal of the Japanese and International Economies, Elsevier, vol. 9(4), pages 426-453, December.
  7. Jacqueline Rothfels, 1997. "Die ostdeutsche Wirtschaftsstruktur und die Produktivitätslücke," Wirtschaft im Wandel, Halle Institute for Economic Research, vol. 3(13), pages 15-21.
  8. John C. Haltiwanger, 1997. "Measuring and analyzing aggregate fluctuations: the importance of building from microeconomic evidence," Review, Federal Reserve Bank of St. Louis, issue May, pages 55-78.
  9. Felix Fitzroy & Michael Funke, 1994. "Skills, Wages and Employment in Eastern and Western Germany," CRIEFF Discussion Papers 9422, Centre for Research into Industry, Enterprise, Finance and the Firm.
  10. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  11. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-48, September.
  12. Rudiger Dornbusch & Holger Wolf, 1992. "Economic Transition in Eastern Germany," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 235-272.
  13. Fritsch, Michael & Mallok, Jörn, 1994. "Die Arbeitsproduktivität des industriellen Mittelstandes in Ostdeutschland : Stand und Entwicklungsperspektiven," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 27(1), pages 53-59.
  14. Hughes Hallett, A J & Ma, Yue, 1993. "East Germany, West Germany, and Their Mezzogiorno Problem: A Parable for European Economic Integration," Economic Journal, Royal Economic Society, vol. 103(417), pages 416-28, March.
  15. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  16. Michael Funke & Holge Strulik, 1999. "Growth and Convergence in a Two-Region Model of Unified Germany," CESifo Working Paper Series 206, CESifo Group Munich.
  17. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  18. Eswar Prasad, 2000. "The Unbearable Stability of the German Wage Structure," IMF Working Papers 00/22, International Monetary Fund.
  19. Frank Siebern, 2000. "Growth and Convergence in a Two-Region Model of Unified Germany," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 363-384, 08.
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Citations

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Cited by:
  1. Fuchs-Schündeln, Nicola & Izem, Rima, 2012. "Explaining the low labor productivity in East Germany – A spatial analysis," Journal of Comparative Economics, Elsevier, vol. 40(1), pages 1-21.
  2. Giovanni Peri & Dieter Urban, 2002. "The Veblen-Gerschenkron Effect of FDI in Mezzogiorno and East Germany," Development Working Papers 164, Centro Studi Luca d\'Agliano, University of Milano.
  3. Jaan Masso & Almas Heshmati, 2003. "The Optimality And Overuse Of Labour In Estonian Manufacturing Enterprises," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 20, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  4. Astrid Cullmann & Christian von Hirschhausen, 2007. "From Transition to Competition: Dynamic Efficiency Analysis of Polish Electricity Distribution Companies," Discussion Papers of DIW Berlin 716, DIW Berlin, German Institute for Economic Research.
  5. Hlavac, Marek, 2010. "Freedom as the key to prosperity: Lessons from the world's growth miracles and economic disasters," MPRA Paper 25563, University Library of Munich, Germany.
  6. Sebastián Claro, 2004. "Vertical and Horizontal Dimensions of Trade Liberalization," Documentos de Trabajo 265, Instituto de Economia. Pontificia Universidad Católica de Chile..
  7. Claro, Sebastian, 2006. "Supporting inefficient firms with capital subsidies: China and Germany in the 1990s," Journal of Comparative Economics, Elsevier, vol. 34(2), pages 377-401, June.
  8. Alexander Schiersch, 2013. "Firm size and efficiency in the German mechanical engineering industry," Small Business Economics, Springer, vol. 40(2), pages 335-350, February.
  9. Oleg Badunenko & Michael Fritsch & Andreas Stephan, 2006. "What Determines the Technical Efficiency of a Firm? The Importance of Industry, Location, and Size," Jenaer Schriften zur Wirtschaftswissenschaft 33/2006, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät.
  10. Kalyuzhnova, Yelena & Vagliasindi, Maria, 2006. "Capacity utilization of the Kazakhstani firms and the Russian financial crisis: A panel data analysis," Economic Systems, Elsevier, vol. 30(3), pages 231-248, October.

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