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The Role of Human Capital and Managerial Skills in Explaining Productivity Gaps Between East and West

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  • Wolfgang Steffen
  • Johannes Stephan

Abstract

This paper assesses the determinants of productivity gaps between firms in the European transition countries and regions and firms in West Germany. The analysis is conducted at the firm level using a unique database constructed by fieldwork. The determinants tested in a simple econometric regression model focus on the issue of human capital and modern market-oriented management. The results are novel inasmuch as a solution was established for the puzzling results in related research with respect to a comparison of formal qualification between East and West. Furthermore, the analysis establishes that the kind of human capital and expertise mostly needed in postsocialist firms are related to the particular requirements of a competitive market-based economic environment. Finally, the analysis also finds empirical support for the role of capital deepening in productivity catchup, as well as the case that the gaps in labor productivity are most importantly rooted in a more labor-intensive production, which does not give rise to a competitive disadvantage.

Suggested Citation

  • Wolfgang Steffen & Johannes Stephan, 2008. "The Role of Human Capital and Managerial Skills in Explaining Productivity Gaps Between East and West," Eastern European Economics, Taylor & Francis Journals, vol. 46(6), pages 5-24, November.
    • Handle: RePEc:mes:eaeuec:v:46:y:2008:i:6:p:5-24
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    References listed on IDEAS

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    1. A. Daly & D.M.W.N. Hitchens & K. Wagner, 1985. "Productivity, Machinery and Skills in a Sample of British and German Manufacturing Plants," National Institute Economic Review, National Institute of Economic and Social Research, vol. 111(1), pages 48-61, February.
    2. Lee, Kevin & Pesaran, M Hashem & Smith, Ron, 1997. "Growth and Convergence in Multi-country Empirical Stochastic Solow Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(4), pages 357-392, July-Aug..
    3. 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.
    4. repec:sae:niesru:v:111:y::i:1:p:48-61 is not listed on IDEAS
    5. Canning, David, 1996. "Specialization, scale economies and economic development," Economics Letters, Elsevier, vol. 52(1), pages 95-100, July.
    6. Dr Johannes Stephan, 2004. "Evolving Structural Patterns in the Enlarging European Division of Labour: Sectoral and Branch Specialisation and the Potentials for Closing the Productivity Gap," Development and Comp Systems 0403003, University Library of Munich, Germany.
    7. Stephan, Johannes & Szalai, Karin, 2003. "Firm-Specific Determinants of Productivity Gaps between East and West German Industrial Branches," IWH Discussion Papers 183/2003, Halle Institute for Economic Research (IWH).
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    Cited by:

    1. Nicholas Bloom & Helena Schweiger & John Van Reenen, 2011. "The Land that Lean Manufacturing Forgot? Management Practices in Transition Countries," NBER Working Papers 17231, National Bureau of Economic Research, Inc.
    2. Jozsef TOTH & Imre FERTO, 2017. "Innovation in the Hungarian food economy," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 63(1), pages 43-51.
    3. Bartz, Wiebke & Mohnen, Pierre & Schweiger, Helena, 2016. "The role of innovation and management practices in determining firm productivity in developing economies," MERIT Working Papers 2016-034, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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    More about this item

    JEL classification:

    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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