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The German motor vehicle industry: Costs and crisis

Author

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  • Truett, Lila J.
  • Truett, Dale B.

Abstract

Japanese expertise with a flexible and efficient automobile manufacturing system posed a challenge to the German motor vehicle industry, renowned for high quality. We investigate cost characteristics of the German industry, including scale economies, input relationships, and other issues. We find German production still has scale economies available, that labor and outsourced intermediate goods and domestic and outsourced intermediate goods are substitutes, the industry has increased its use of outsourced inputs, labor demand has become more sensitive to its own price and that of outsourced inputs, and the industry restructuring appears to have been successful in increasing its international competitiveness.

Suggested Citation

  • Truett, Lila J. & Truett, Dale B., 2017. "The German motor vehicle industry: Costs and crisis," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 49-55.
  • Handle: RePEc:eee:reveco:v:48:y:2017:i:c:p:49-55
    DOI: 10.1016/j.iref.2016.11.012
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    References listed on IDEAS

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    1. Christoph Knoppik & Thomas Beissinger, 2003. "How Rigid are Nominal Wages? Evidence and Implications for Germany," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(4), pages 619-641, December.
    2. Julius Spatz & Peter Nunnenkamp, 2002. "Globalization of the Automobile Industry - Traditional Locations under Pressure?," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 57(04), pages 469-494, December.
    3. Harald Uhlig, 2006. "Regional Labor Markets, Network Externalities and Migration: The Case of German Reunification," American Economic Review, American Economic Association, vol. 96(2), pages 383-387, May.
    4. Truett, Lila J. & Truett, Dale B., 2014. "The South Korean auto industry's path to maturity," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 86-94.
    5. 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).
    6. 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.
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    More about this item

    Keywords

    Globalization; Germany; Motor vehicle industry;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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