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Zur empirischen Suche nach einer effizienten Investitionsquote für Ostdeutschland / About the Empirical Search for an Efficient Ratio of Investment to GDP for East Germany

Author

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  • Herrmann Marco

    (VNG-Verbundnetz Gas Aktiengesellschaft, Leipzig, Braunstraße 7, D-04347 Leipzig)

Abstract

The huge amount of white elephants in East Germany suggests the search for a statistical figure for an "efficient" level of investment. Following the Mankiw/Romer/Weil (1992) augmented Solow model and the studies of Borensztein/Montiel (1992) and Thimann (1996) and applying the results of a cross-country regression of 19 OECD countries to data on East Germany one could quantify the steady-state figure of the ratio of (real) investment to (real) GDP. However, the reduced sample period in East Germany after 1990 is inconsistent with the long-run characteristics of a steady-state relationship. Thus, the analysis needs to be carried into the future. On the basis of the forecasted determinants of growth one could calculate the level of investment which is sufficient for the expected growth of income per capita. One could also quantify the potential growth accompanied by the past, present and future level of investment. Differences between the actual investment and the necessary investment can be associated with the impact of so-called “investment effects” in East Germany. “Investment effects” describe the non-physical depreciation of modern production facilities due to unexpected market changes. Hence, the impact of investment effects causes an actual ratio of investment to GDP. This figure measures the share of investment in GDP that actually leads to an increase of income in the future.

Suggested Citation

  • Herrmann Marco, 2002. "Zur empirischen Suche nach einer effizienten Investitionsquote für Ostdeutschland / About the Empirical Search for an Efficient Ratio of Investment to GDP for East Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 222(6), pages 683-705, December.
    • Handle: RePEc:jns:jbstat:v:222:y:2002:i:6:p:683-705
    DOI: 10.1515/jbnst-2002-0604
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