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The Role of the Human Capital and Managerial Skills in Explaining the Productivity Gaps between East and West

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  • Wolfgang Steffen
  • Johannes Stephan

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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Bibliographic Info

Paper provided by Halle Institute for Economic Research in its series IWH Discussion Papers with number 11.

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Date of creation: Nov 2007
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Handle: RePEc:iwh:dispap:11-07

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Keywords: productivity gap; central East Europe; East Germany; firm-level analysis;

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  1. Canning, David, 1996. "Specialization, scale economies and economic development," Economics Letters, Elsevier, vol. 52(1), pages 95-100, July.
  2. Dirk Czarnitzki, 2005. "The Extent and Evolution of Productivity Deficiency in Eastern Germany," Journal of Productivity Analysis, Springer, vol. 24(2), pages 211-231, October.
  3. Dr Johannes Stephan, 2008. "Evolving Structural Patterns in the Enlarging European Division of Labour: Sectoral and Branch Specialisation and the Potentials for Closing the Productivity Gap," Working Papers id:1650, eSocialSciences.
  4. Kevin Lee & M. Hashem Pesaran & Ron Smith, . "Growth and Convergence in a Multi-County empirical Stochastic Solow Model," Discussion Papers in Economics 96/14, Department of Economics, University of Leicester.
  5. Jutta G√ľnther & Oliver Gebhardt, 2005. "Eastern Germany in the Process of Catching Up : The Role of Foreign and West German Investors in Technological Renewal," Eastern European Economics, M.E. Sharpe, Inc., vol. 43(3), pages 78-102, May.
  6. Lee, Kevin & Pesaran, M Hashem & Smith, Ron, 1997. "Growth and Convergence in Multi-country Empirical Stochastic Solow Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(4), pages 357-92, July-Aug..
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