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The Extent and Evolution of Productivity Deficiency in Eastern Germany

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  • Dirk Czarnitzki

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Abstract

Since the German re-unification in 1990, Eastern Germany has been a transition economy. After a phase of catching up in productivity with Western Germany from 1991 to 1996, growth rates in the producing sector have dropped below those in Western Germany since 1997. This study investigates whether this macroeconomic picture holds at the microeconomic level. For the special case of Eastern Germany, I suggest identifying productivity gaps by using comparable Western German firms as a “productivity benchmark”. Applying an econometric matching procedure allows to study the productivity gap at the firm level in detail. Besides labor and capital, other factors like innovation and firm ownership are taken into account. The macroeconomic facts are broadly confirmed: a significant gap has remained in recent years. Moreover, Eastern German innovators perform worse than their Western German pendants, and firms owned by Western German or foreign companies perform better than those owned by Eastern German entities. Copyright Springer Science+Business Media, Inc. 2005

Suggested Citation

  • Dirk Czarnitzki, 2005. "The Extent and Evolution of Productivity Deficiency in Eastern Germany," Journal of Productivity Analysis, Springer, vol. 24(2), pages 211-231, October.
  • Handle: RePEc:kap:jproda:v:24:y:2005:i:2:p:211-231
    DOI: 10.1007/s11123-005-4706-0
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    References listed on IDEAS

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    1. Hans-Werner Sinn, 2003. "The Laggard of Europe (CESifo Forum Vol. 4, Special Issue No. 1)," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 4(SPECIALIS), pages 01-32, October.
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    Cited by:

    1. Yongzheng Liu, 2014. "Does competition for capital discipline governments? The role of fiscal equalization," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(3), pages 345-374, June.
    2. Hussinger, Katrin & Wastyn, Annelies, 2011. "In search for the not-invented-here syndrome: The role of knowledge sources and firm success," ZEW Discussion Papers 11-048, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    3. repec:jns:jbstat:v:227:y:2007:i:2:p:168-186 is not listed on IDEAS
    4. Maier, Charles S., 2010. "The Travails of Unification: East Germany's Economic Transition since 1990," WIDER Working Paper Series 060, World Institute for Development Economic Research (UNU-WIDER).
    5. Dirk Czarnitzki & Katrin Hussinger & Cédric Schneider, 2015. "R&D Collaboration with Uncertain Intellectual Property Rights," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(2), pages 183-204, March.
    6. Katrin Hussinger, 2006. "Is Silence Golden? Patents Versus Secrecy At The Firm Level," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(8), pages 735-752.
    7. Czarnitzki, Dirk & Licht, Georg, 2004. "Die Rolle der Innovationsförderung im Aufholprozess Ostdeutschlands," ZEW Discussion Papers 04-68, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    8. Jens M. Arnold & Katrin Hussinger, 2010. "Exports versus FDI in German Manufacturing: Firm Performance and Participation in International Markets," Review of International Economics, Wiley Blackwell, vol. 18(4), pages 595-606, September.
    9. Bernhard Dachs & Bernd Ebersberger & Hans Lööf, 2008. "The innovative performance of foreign-owned enterprises in small open economies," The Journal of Technology Transfer, Springer, vol. 33(4), pages 393-406, August.
    10. Oleg Badunenko & Michael Fritsch & Andreas Stephan, 2006. "What Determines the Technical Efficiency of a Firm? The Importance of Industry, Location, and Size," Jenaer Schriften zur Wirtschaftswissenschaft (Expired!) 33/2006, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät.
    11. Görzig Bernd & Gornig Martin & Werwatz Axel, 2007. "Produktdiversifizierung: Konvergenz zwischen ost- und westdeutschen Unternehmen / Product Diversification: Have East-German Enterprises Caught-Up with the West?: Eine Dekomposition mit Mikrodaten der ," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 227(2), pages 168-186, April.
    12. Bernhard Dachs & Bernd Ebersberger & Steffen Kinkel & Oliver Som, 2015. "The effects of production offshoring on R&D and innovation in the home country," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(1), pages 9-31, March.
    13. Parrilli, Mario Davide & Alcalde Heras, Henar, 2016. "STI and DUI innovation modes: Scientific-technological and context-specific nuances," Research Policy, Elsevier, vol. 45(4), pages 747-756.
    14. Dirk Czarnitzki & Kornelius Kraft, 2006. "R&D and Firm Performance in a Transition Economy," Kyklos, Wiley Blackwell, vol. 59(4), pages 481-496, November.
    15. Sara Biancini, 2008. "Regulating National Firms in a Common Market," CESifo Working Paper Series 2209, CESifo Group Munich.
    16. Criscuolo, Paola & Nicolaou, Nicos & Salter, Ammon, 2012. "The elixir (or burden) of youth? Exploring differences in innovation between start-ups and established firms," Research Policy, Elsevier, vol. 41(2), pages 319-333.
    17. Cuijpers, Maarten & Guenter, Hannes & Hussinger, Katrin, 2011. "Costs and benefits of inter-departmental innovation collaboration," Research Policy, Elsevier, vol. 40(4), pages 565-575, May.
    18. Schwiebacher, Franz, 2012. "Complementary assets, patent thickets and hold-up threats: Do transaction costs undermine investments in innovation?," ZEW Discussion Papers 12-015, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    19. Katrin Hussinger, 2008. "R&D and subsidies at the firm level: an application of parametric and semiparametric two-step selection models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(6), pages 729-747.
    20. Steffen, Wolfgang & Stephan, Johannes, 2007. "The Role of the Human Capital and Managerial Skills in Explaining the Productivity Gaps between East and West," IWH Discussion Papers 11/2007, Halle Institute for Economic Research (IWH).
    21. Hoewer, Daniel & Schmidt, Tobias & Sofka, Wolfgang, 2011. "An information economics perspective on main bank relationships and firm R&D," ZEW Discussion Papers 11-055, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    22. Aschhoff, Birgit, 2009. "The effect of subsidies on R&D investment and success: do subsidy history and size matter?," ZEW Discussion Papers 09-032, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    23. Grimpe, Christoph & Hussinger, Katrin, 2009. "Inventions under siege? The impact of technology competition on licensing," ZEW Discussion Papers 09-039, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    24. Herstad, Sverre J. & Sandven, Tore & Ebersberger, Bernd, 2015. "Recruitment, knowledge integration and modes of innovation," Research Policy, Elsevier, vol. 44(1), pages 138-153.
    25. Lin, Chen & Lin, Ping & Song, Frank M. & Li, Chuntao, 2011. "Managerial incentives, CEO characteristics and corporate innovation in China's private sector," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 176-190, June.

    More about this item

    Keywords

    productivity gap; eastern germany; non-parametric matching; C14; D24;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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