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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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File URL: https://www.ifw-members.ifw-kiel.de/publications/explaining-the-low-labor-productivity-in-east-germany-a-spatial-analysis-1/kap1307.pdf
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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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