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On the competitive position of Eastern German manufacturing: Why is catching-up so slow?


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  • Gerling, Katja
  • Schmidt,Klaus-Dieter
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    Seven years after the transition from plan to market, it is hard to summon up much enthusiasm for the results of active restructuring of the eastern German economy. Although companies have made considerable efforts to reach the efficiency level of their western German counterparts, the gap is still large. In our paper, we provide a selective and interpretative account of the restructuring process in eastern German manufacturing. We start with modelling some economic relations which can be considered crucial in the restructuring process: ownership status and overall performance, sectoral and regional specialization, gross output and value added, investment and productivity, and wages and employment. In search of adjustment failures, we examine these relations by comparing the performance of eastern German with that of western German enterprises. Finally, we discuss the key policy question of how to overcome the difficulties. Without an about-face in wage policy, it will be difficult to shift the balance from wage convergence to efficiency convergence.

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    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 825.

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    Date of creation: 1997
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    Handle: RePEc:kie:kieliw:825

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    1. Schmidt, Klaus-Dieter, 1996. "German unification: A progress report," Kiel Working Papers 722, Kiel Institute for the World Economy.
    2. Gerling, Katja & Schmidt, Klaus-Dieter, 1997. "Restructuring and competitiveness in the transition process: Evidence from an Eastern German firm panel," Kiel Working Papers 791, Kiel Institute for the World Economy.
    3. Landesmann,Michael A. & Székely,István P. (ed.), 1995. "Industrial Restructuring and Trade Reorientation in Eastern Europe," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521480857.
    4. Christian Thimann & Michael Breitner, 1995. "Eastern Germany and the conflict between wage adjustment, investment, and employment: A numerical analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 131(3), pages 446-469, September.
    5. Aghion, Philippe & Blanchard, Olivier J & Carlin, Wendy, 1994. "The Economics of Enterprise Restructuring in Central and Eastern Europe," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1058, C.E.P.R. Discussion Papers.
    6. James Angresano, 1995. "Marketization, Restructuring and Competition in Transition Industries of Central and Eastern Europe," Comparative Economic Studies, Palgrave Macmillan, vol. 37(3), pages 77-80, September.
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    Cited by:
    1. Katja Gerling, 2000. "Subsidization and Structural Change in Eastern German Transition: Did Economic Policy Meet Its Objectives?," Kiel Working Papers 998, Kiel Institute for the World Economy.
    2. Gerling, Katja, 1998. "Transfers and transition: The impact of government support on factor demand and production in Eastern Germany," Kiel Working Papers 878, Kiel Institute for the World Economy.
    3. Schmidt, Klaus-Dieter, 1997. "Corporate restructuring and export performance in the transition process: The case of Eastern Germany," Kiel Working Papers 845, Kiel Institute for the World Economy.
    4. Alexander Eickelpasch & Tatjana Ribakova, 1997. "Restructuring and Competition Strategies of Privatised Enterprises in East Germany: What Lessons for Russia?," Discussion Papers of DIW Berlin 157, DIW Berlin, German Institute for Economic Research.


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