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A Study of the Competitiveness of Regions based on a Cluster Analysis: The Example of East Germany

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  • Franz Kronthaler

Abstract

The Eastern enlargement of the EU is likely to increase the regional disparities within the EU. At the same time regional cohesion is a primary objective of EU economic policies. This raises the question of whether and when the regions of the accession countries will reach the average economic level of the EU. East Germany is used as an instructive example of a transition country for the integration process of the new Central and Eastern European member states. The objective of this study is to analyse whether some East German regions have the same economic capability by now as the regions in West Germany so that they are on a competitive basis with the West German regions and are able to reach the same economic level in the long run. If this is not the case, it is important to know more about the reasons for the economic weakness of the East German regions twelve years after unification. The study is based on a cluster analysis. Criteria for the cluster formation are several economic indicators, which provide information about the economic capability and their determinants. The choice of the indicators is based on a review of results of the theoretical and empirical literature on the new growth theory. The results show that most of the East German regions have not yet reached the economic capability and the competitiveness of their West German counterparts so that they - from the viewpoint of the new growth theory - are not in the position to reach the same economic level. According to this theory economic disadvantages are most notably the consequences of less technical progress, a lack of entrepreneurship and fewer business concentration. Under these points it is especially noteworthy that young well educated people leave these East German Regions so that human capital will be in the near future also a bottle-neck. Only a few regions in East Germany - those with important agglomerations - are comparable to those West German regions with average cabability and competitiveness, but not to those with economic capability and competitivness above average. Even those more advanced East German Regions suffer from economic disadvantages as less technical progress and low business concentration. There are important policy implications based on these results: regional policy funding in East Germany was not able to assist raising all regions to a sufficient level of competitiveness. It may be more effective to concentrate the regional policy funding on a selection of important agglomerations. This has also strong implications for the EU regional policy assuming that the accession countries will have similar problems in catching up to the economic level of the EU as have the East German regions. Keywords: Regional Disparities, Competitiveness, Cluster Analysis, East Germany, EU-Enlargement JEL classification: R12; P52; O18

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  • Franz Kronthaler, 2003. "A Study of the Competitiveness of Regions based on a Cluster Analysis: The Example of East Germany," ERSA conference papers ersa03p27, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa03p27
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    References listed on IDEAS

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    2. Delalić Adela & Šikalo Mirza & Numanović Selma, 2023. "Regionalization Based on Socio-Economic Development Indicators in Bosnia and Herzegovina – Example of Federation of Bosnia and Herzegovina," South East European Journal of Economics and Business, Sciendo, vol. 18(1), pages 15-26, June.
    3. Massimo Aria & Giuseppe Lucio Gaeta & Ugo Marani, 2019. "Similarities and Differences in Competitiveness Among European NUTS2 Regions: An Empirical Analysis Based on 2010–2013 Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 142(1), pages 431-450, February.
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    5. Krkoska, Libor & Robeck, Katrin, 2008. "Business environment and enterprise behaviour in East Germany compared to West Germany and Central Europe," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 568-583, December.
    6. Stefan Arent & Wolfgang Nagl, 2011. "Unemployment Benefit and Wages: The Impact of the Labor Market Reform in Germany on (Reservation) Wages," ifo Working Paper Series 101, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    7. Wolfgang Nagl & Stefan Arent, 2012. "Unemployment Benefits and Wages: Evidence from the German Hartz-Reform," ERSA conference papers ersa12p78, European Regional Science Association.
    8. Arent Stefan & Nagl Wolfgang, 2013. "Unemployment Compensation and Wages: Evidence from the German Hartz Reforms," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 233(4), pages 450-466, August.
    9. Wolfgang Nagl, 2014. "Lohnrisiko und Altersarmut im Sozialstaat," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 54.
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    More about this item

    Keywords

    regional disparities; competitiveness; cluster analysis; east germany; eu-enlargement jel classification: r12; p52; o18;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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