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

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  • 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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Bibliographic 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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Keywords: Transferability of Human Capital; Spatial Allocation of Labor;

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References

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Citations

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Cited by:
  1. Heineck, Guido & Süssmuth, Bernd, 2012. "A different look at Lenin's legacy: Social capital and risk taking in the two Germanies," Working Papers 118, University of Leipzig, Faculty of Economics and Management Science.
  2. Bartz, Kevin & Fuchs-Schündeln, Nicola, 2012. "The role of borders, languages, and currencies as obstacles to labor market integration," European Economic Review, Elsevier, vol. 56(6), pages 1148-1163.
  3. Friehe, Tim & Mechtel, Mario, 2014. "Conspicuous consumption and political regimes: Evidence from East and West Germany," European Economic Review, Elsevier, vol. 67(C), pages 62-81.
  4. Susanne Prantl & Alexandra Spitz-Oener, 2014. "Interacting Product and Labor Market Regulation and the Impact of Immigration on Native Wages," SFB 649 Discussion Papers SFB649DP2014-018, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  5. Merkl, Christian & Snower, Dennis J., 2008. "Escaping the Unemployment Trap: The Case of East Germany," IZA Discussion Papers 3681, Institute for the Study of Labor (IZA).
  6. Kuehn, Zoe, 2012. "Migration, Wages, and Parental Background: Obstacles to Entrepreneurship and Growth in East Germany," MPRA Paper 49250, University Library of Munich, Germany.
  7. 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.
  8. Olga A. Demidova, 2014. "The asymmetric spatial effects for eastern and western regions of Russia," HSE Working papers WP BRP 50/EC/2014, National Research University Higher School of Economics.

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