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Industrial Policy and the East German Productivity Puzzle

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  • Henning Klodt

Abstract

Catching-up of East German productivity to West German levels has completely faded out since the mid-1990s. The remaining productivity gap cannot be attributed to an inferior capital endowment or qualification deficiencies of the East German labor force. Instead, it appears to be the result of an inappropriate design of industrial policy which concentrated on the subsidization of physical capital and largely ignored the advance of human capital- and service-intensive industrial structures. East Germany will have to face another wave of painful structural adjustment when capital-intensive industries are no longer protected from competition by public subsidies. Copyright Verein fü Socialpolitik and Blackwell Publishers Ltd 2000.

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  • Henning Klodt, 2000. "Industrial Policy and the East German Productivity Puzzle," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 315-333, August.
  • Handle: RePEc:bla:germec:v:1:y:2000:i:3:p:315-333
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    Cited by:

    1. Smolny Werner, 2003. "Produktivitätsanpassung in Ostdeutschland. Bestandsaufnahme und Ansatzpunkte einer Erklärung," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 223(2), pages 239-254, April.
    2. Smolny, Werner, 2010. "Dynamic adjustment and long-run equilibria: Panel data estimates for the East German states," Economic Modelling, Elsevier, vol. 27(5), pages 1223-1229, September.
    3. Erich Gundlach, 2003. "Growth Effects of EU Membership: The Case of East Germany," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(3), pages 237-270, September.
    4. Tobias Scholl & Thomas Brenner & Martin Wendel, 2016. "Evolving localization patterns of company foundationsEvidence from the German MST-industry," Journal of Evolutionary Economics, Springer, vol. 26(5), pages 1067-1087, December.
    5. 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.
    6. Kitterer, Wolfgang, 2002. "Die Ausgestaltung der Mittelzuweisungen im Solidarpakt II," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 02-1, University of Cologne, FiFo Institute for Public Economics.
    7. Izem, Rima & Fuchs-Schündeln, Nicola, 2007. "Explaining the low labor productivity in East Germany: a spatial analysis," Kiel Working Papers 1307, Kiel Institute for the World Economy (IfW).
    8. Karl Brenke & Klaus F. Zimmermann, 2009. "Ostdeutschland 20 Jahre nach dem Mauerfall: was war und was ist heute mit der Wirtschaft?," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 78(2), pages 32-62.
    9. Fuchs-Schündeln, Nicola & Izem, Rima, 2012. "Explaining the low labor productivity in East Germany – A spatial analysis," Journal of Comparative Economics, Elsevier, vol. 40(1), pages 1-21.
    10. repec:iab:iabzaf:v:38:i:4:p:510-530 is not listed on IDEAS
    11. Czarnitzki, Dirk, 2003. "Extent and Evolution of the Productivity Gap in Eastern Germany," ZEW Discussion Papers 03-25, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    12. Christian Ochsner & Michael Weber, 2014. "Die Kleinteiligkeit der ostdeutschen Wirtschaft - dynamisch betrachtet," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 21(05), pages 22-33, October.
    13. Kroker, Rolf, 2000. "Zehn Jahre Aufbau Ost: Erfolge, Defizite und Reformbedarf," IW-Trends – Vierteljahresschrift zur empirischen Wirtschaftsforschung, Institut der deutschen Wirtschaft Köln (IW) / Cologne Institute for Economic Research, vol. 27(3), pages 42-76.
    14. Kilin F.S., 2003. "Analysis of convergence process of East German economy on the base of a two-region growth model," GE, Growth, Math methods 0304002, EconWPA.
    15. Stefan Arent & Alexander Eck & Oskar Krohmer & Robert Lehmann & Wolfgang Nagl & Joachim Ragnitz & Marcel Thum, 2011. "Wirtschaftliche Entwicklung Sachsens im Ländervergleich: Bestandsaufnahme und Perspektiven: Gutachten im Auftrag der Sächsischen Staatskanzlei," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 59, June.
    16. Snower, Dennis J. & Merkl, Christian, 2006. "The caring hand that cripples: The East German labor market after reunification (detailed version)," Kiel Working Papers 1263, Kiel Institute for the World Economy (IfW).
    17. Mallok, Jörn, 2005. "Produktivitätsentwicklung in ostdeutschen Industriebetrieben : Ergebnisse einer Fallstudienanalyse (1992-2002) (Development of productivity in eastern German industrial enterprises : results of a case," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(4), pages 510-530.
    18. Eckey, Hans-Friedrich & Kosfeld, Reinhold & Türck, Matthias, 2005. "Regional convergence in Germany: A geographically weighted regression approach," Volkswirtschaftliche Diskussionsbeiträge 76, University of Kassel, Faculty of Economics and Management.
    19. Eva Dettmann & Matthias Brachert & Mirko Titze, 2016. "Identifying the Effects of Place-Based Policies - Causal Evidence from Germany," CESifo Working Paper Series 5901, CESifo Group Munich.
    20. Smolny Werner, 2012. "Cyclical Adjustment, Capital-labor Substitution and Total Factor Productivity Convergence – East Germany After Unification," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 232(4), pages 445-459, August.
    21. Dettmann, Eva & Titze, Mirko & Weyh, Antje, 2017. "Who benefits from GRW? Heterogeneous employment effects of investment subsidies in Saxony Anhalt," IWH Discussion Papers 27/2017, Halle Institute for Economic Research (IWH).
    22. 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(2), pages 1-92.
    23. Beate Schirwitz & Christian Seiler & Klaus Wohlrabe, 2009. "Regionale Konjunkturzyklen in Deutschland - Teil III: Konvergenz," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 62(15), pages 23-32, August.

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