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Why is Germany's manufacturing industry so competitive?

  • Foders, Federico
  • Vogelsang, Manuel Molina
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    The German economy has been outperforming other member countries of the European Union during the recent Great Recession and the still ongoing European debt crisis. What are the determinants of this outcome? This paper sets out to empirically analyze the trade and technology specialization and the price/cost performance of the German economy over the period 1990 - 2011. Furthermore, we apply the unit value approach to determine whether the competitiveness of German manufacturing products is related to price or quality advantage. Also, we estimate the degree of vertical specialization characterizing the German export sector in order to assess the role global value chains play in strengthening Germany's position in manufacturing. All indicators are calculated for Germany, the Republic of Korea, the People's Republic of China, Japan and the United States. Our results confirm that Germany is specialized in medium-range technology products and show that quality is the main driver of Germany's international success, that price and cost advantage determines competitiveness in some product groups and that R&D efforts have contributed to develop and maintain German competitiveness in manufactured products.

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    File URL: http://econstor.eu/bitstream/10419/92914/1/777055988.pdf
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    Paper provided by Kiel Institute for the World Economy (IfW) in its series Kiel Policy Brief with number 69.

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    Date of creation: 2014
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    Handle: RePEc:zbw:ifwkpb:69
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    1. Thomas Hatzichronoglou, 1996. "Globalisation and Competitiveness: Relevant Indicators," OECD Science, Technology and Industry Working Papers 1996/5, OECD Publishing.
    2. Lybbert, Travis J. & Zolas, Nikolas J., 2014. "Getting patents and economic data to speak to each other: An ‘Algorithmic Links with Probabilities’ approach for joint analyses of patenting and economic activity," Research Policy, Elsevier, vol. 43(3), pages 530-542.
    3. Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December.
    4. Aiginger, Karl, 1997. "The Use of Unit Values to Discriminate between Price and Quality Competition," Cambridge Journal of Economics, Oxford University Press, vol. 21(5), pages 571-92, September.
    5. Irving B. Kravis, 1956. ""Availability" and Other Influences on the Commodity Composition of Trade," Journal of Political Economy, University of Chicago Press, vol. 64, pages 143.
    6. Wolfgang Gerstenberger, 1992. "Zur Wettbewerbsposition der deutschen Industrie im High-Tech-Bereich," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 45(13), pages 14-23, October.
    7. Mercedes Delgado & Christian Ketels & Michael E. Porter & Scott Stern, 2012. "The Determinants of National Competitiveness," NBER Working Papers 18249, National Bureau of Economic Research, Inc.
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