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Explaining the Low Labor Productivity in East Germany. A Spatial Analysis

  • Nicola Fuchs-Schündeln
  • Rima Izem

This paper presents a spatial analysis of unemployment rates in Germany. The goal of this analysis is to explain the stubbornly low labor productivity and high unemployment rates in Eastern Germany. We build a model of commuting to distinguish between worker and job characteristics as the main causes of the low labor productivity, and use the method of simulated moments to estimate the East-West ratios of worker and job characteristics. The “slope” of the unemployment rate across the former East-West border serves as the main identification of the model. The preliminary results suggest that East and West German skills are very similar, while job characteristics differ significantly between East and West.

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1307.

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Length: 25 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:kie:kieliw:1307
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  1. Jennifer Hunt, 2006. "Staunching Emigration from East Germany: Age and the Determinants of Migration," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 1014-1037, 09.
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  16. Kline, Patrick, 2008. "Understanding Sectoral Labor Market Dynamics: An Equilibrium Analysis of the Oil and Gas Field Services Industry," Working Papers 43, Yale University, Department of Economics.
  17. Harald Uhlig, 2006. "Regional Labor Markets, Network Externalities and Migration: The Case of German Reunification," SFB 649 Discussion Papers SFB649DP2006-004, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
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  29. Vera Dietrich, 1997. "Kapitalausstattung und Produktivitätsrückstand im ostdeutschen Unternehmenssektor," Wirtschaft im Wandel, Halle Institute for Economic Research, vol. 3(7), pages 5-9.
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  33. repec:iwh:iwhwiw:1-98-2 is not listed on IDEAS
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