Explaining the Low Labor Productivity in East Germany. A Spatial Analysis

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Explaining the Low Labor Productivity in East Germany. A Spatial Analysis

Author Info

Nicola Fuchs-Schündeln
Rima Izem

Abstract

This paper presents a spatial analysis of unemployment rates in Germany. The goal of this analysis is to explain the stubbornly low labor productivity and high unemployment rates in Eastern Germany. We build a model of commuting to distinguish between worker and job characteristics as the main causes of the low labor productivity, and use the method of simulated moments to estimate the East-West ratios of worker and job characteristics. The “slope” of the unemployment rate across the former East-West border serves as the main identification of the model. The preliminary results suggest that East and West German skills are very similar, while job characteristics differ significantly between East and West.

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Publisher Info
Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1307.

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Length: 25 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:kie:kieliw:1307

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Find related papers by JEL classification:
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-02-17 (All new papers)
NEP-EFF-2007-02-17 (Efficiency & Productivity)
NEP-GEO-2007-02-17 (Economic Geography)
NEP-HRM-2007-02-17 (Human Capital & Human Resource Management)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Jörg Decressin, 1994. "Internal migration in West Germany and implications for East-West salary convergence," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(2), pages 231-257, June. [Downloadable!] (restricted)
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Other versions:
- Canova, Fabio & Ravn, Morten O., 1998. "The Macroeconomic Effects of German Unification: Real Adjustments and the Welfare State," CEPR Discussion Papers 2038, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Fabio Canova & Morten Ravn, 2000. "The Macroeconomic Effects of German Unification: Real Adjustments and the Welfare State," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 423-460, July. [Downloadable!] (restricted)
Ricardo Lagos, 2000. "An Alternative Approach to Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 851-873, October. [Downloadable!] (restricted)
Merkl, Christian & Snower, Dennis J., 2006. "The Caring Hand that Cripples: The East German Labour Market after Reunification," CEPR Discussion Papers 5656, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Other versions:
- Dennis J. Snower & Christian Merkl, 2006. "The Caring Hand that Cripples: The East German Labor Market after Reunification," American Economic Review, American Economic Association, vol. 96(2), pages 375-382, May. [Downloadable!]
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Other versions:
- Harald Uhlig, 2007. "Regional Labor Markets, Network Externalities and Migration: The Case of German Reunification," Kiel Working Papers 1311, Kiel Institute for the World Economy. [Downloadable!]
- Harald Uhlig, 2006. "Regional Labor Markets, Network Externalities and Migration: The Case of German Reunification," SFB 649 Discussion Papers SFB649DP2006-004, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
Stephen Redding & Daniel M. Sturm, 2005. "The Costs of Remoteness: Evidence from German Division and Reunification," CEP Discussion Papers dp0688, Centre for Economic Performance, LSE. [Downloadable!]
Other versions:
- Stephen Redding & Daniel M. Sturm, 2005. "The Costs of Remoteness: Evidence from German Division and Reunification," STICERD - Political Economy and Public Policy Paper Series 11, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
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- Stephen J. Redding & Daniel M. Sturm, 2008. "The Costs of Remoteness: Evidence from German Division and Reunification," American Economic Review, American Economic Association, vol. 98(5), pages 1766-97, December. [Downloadable!]
Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
Henning Klodt, 2000. "Industrial Policy and the East German Productivity Puzzle," German Economic Review, Blackwell Publishing, vol. 1(3), pages 315-333, 08. [Downloadable!] (restricted)
Michael C. Burda & Jennifer Hunt, 2001. "From Reunification to Economic Integration: Productivity and the Labor Market in Eastern Germany," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2001-2), pages 1-92. [Downloadable!]
Jennifer Hunt, 2006. "Staunching Emigration from East Germany: Age and the Determinants of Migration," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 1014-1037, 09. [Downloadable!] (restricted)

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Christian Merkl & Dennis J. Snower, 2007. "Escaping the Unemployment Trap — The Case of East Germany," Kiel Working Papers 1309, Kiel Institute for the World Economy. [Downloadable!]

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This page was last updated on 2009-12-18.

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