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

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  • Michael Funke

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  • 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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Bibliographic Info

Paper provided by Hamburg University, Department of Economics in its series Quantitative Macroeconomics Working Papers with number 20012.

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Length: 19 pages
Date of creation: Dec 2000
Date of revision:
Handle: RePEc:ham:qmwops:20012

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

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References

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  1. repec:att:wimass:8904 is not listed on IDEAS
  2. 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.
  3. George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
  4. 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.
  5. Michael Funke & Holge Strulik, 1999. "Growth and Convergence in a Two-Region Model of Unified Germany," CESifo Working Paper Series 206, CESifo Group Munich.
  6. Eswar S. Prasad, 2004. "The Unbearable Stability of the German Wage Structure: Evidence and Interpretation," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 354-385.
  7. 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.
  8. 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.
  9. Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-16, May.
  10. 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.
  11. 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.
  12. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  13. Oulton, Nicholas, 1998. "Competition and the Dispersion of Labour Productivity amongst UK Companies," Oxford Economic Papers, Oxford University Press, vol. 50(1), pages 23-38, January.
  14. 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.
  15. Burda, Michael C & Funke, Michael, 1993. "Eastern Germany: Can't We Be More Optimistic?," CEPR Discussion Papers 863, C.E.P.R. Discussion Papers.
  16. 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.
  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.
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Cited by:
  1. 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.
  2. 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.
  3. Sebastián Claro, 2004. "Vertical and Horizontal Dimensions of Trade Liberalization," Documentos de Trabajo 265, Instituto de Economia. Pontificia Universidad Católica de Chile..
  4. 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.
  5. 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.
  6. Masso, Jaan & Heshmati, Almas, 2003. "The Optimality and Overuse of Labour in Estonian Manufacturing Enterprises," IZA Discussion Papers 884, Institute for the Study of Labor (IZA).
  7. Alexander Schiersch, 2013. "Firm size and efficiency in the German mechanical engineering industry," Small Business Economics, Springer, vol. 40(2), pages 335-350, February.

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