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On the competitive position of Eastern German manufacturing: Why is catching-up so slow?

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  • Gerling, Katja
  • Schmidt, Klaus-Dieter

Abstract

Seven years after the transition from plan to market, it is hard to summon up much enthusiasm for the results of active restructuring of the eastern German economy. Although companies have made considerable efforts to reach the efficiency level of their western German counterparts, the gap is still large. In our paper, we provide a selective and interpretative account of the restructuring process in eastern German manufacturing. We start with modelling some economic relations which can be considered crucial in the restructuring process: ownership status and overall performance, sectoral and regional specialization, gross output and value added, investment and productivity, and wages and employment. In search of adjustment failures, we examine these relations by comparing the performance of eastern German with that of western German enterprises. Finally, we discuss the key policy question of how to overcome the difficulties. Without an about-face in wage policy, it will be difficult to shift the balance from wage convergence to efficiency convergence.

Suggested Citation

  • Gerling, Katja & Schmidt, Klaus-Dieter, 1997. "On the competitive position of Eastern German manufacturing: Why is catching-up so slow?," Kiel Working Papers 825, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:825
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    1. Schmidt, Klaus-Dieter, 1996. "German unification: A progress report," Kiel Working Papers 722, Kiel Institute for the World Economy (IfW Kiel).
    2. Philippe Aghion & Olivier Jean Blanchard & Wendy Carlin, 1997. "The Economics of Enterprise Restructuring in Central and Eastern Europe," International Economic Association Series, in: John E. Roemer (ed.), Property Relations, Incentives and Welfare, chapter 11, pages 271-325, Palgrave Macmillan.
    3. Landesmann,Michael A. & Székely,István P. (ed.), 1995. "Industrial Restructuring and Trade Reorientation in Eastern Europe," Cambridge Books, Cambridge University Press, number 9780521480857, November.
    4. Kerstin Gerling, 2008. "The Real Consequences of Financial Market Integration when Countries Are Heterogeneous," Working Papers 141, Oesterreichische Nationalbank (Austrian Central Bank).
    5. Christian Thimann & Michael Breitner, 1995. "Eastern Germany and the conflict between wage adjustment, investment, and employment: A numerical analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 131(3), pages 446-469, September.
    6. Gerling, Katja & Schmidt, Klaus-Dieter, 1997. "Restructuring and competitiveness in the transition process: Evidence from an Eastern German firm panel," Kiel Working Papers 791, Kiel Institute for the World Economy (IfW Kiel).
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    Cited by:

    1. Gerling, Katja, 1998. "Transfers and transition: The impact of government support on factor demand and production in Eastern Germany," Kiel Working Papers 878, Kiel Institute for the World Economy (IfW Kiel).
    2. Gupta, Asha, 1998. "Privatization in East Germany: Can the Treuhandanstalt provide a model?," Kiel Working Papers 849, Kiel Institute for the World Economy (IfW Kiel).
    3. Gerling, Katja, 2000. "Subsidization and Structural Change in Eastern German Transition: Did Economic Policy Meet Its Objectives?," Kiel Working Papers 998, Kiel Institute for the World Economy (IfW Kiel).
    4. Alexander Eickelpasch & Tatjana Ribakova, 1997. "Restructuring and Competition Strategies of Privatised Enterprises in East Germany: What Lessons for Russia?," Discussion Papers of DIW Berlin 157, DIW Berlin, German Institute for Economic Research.
    5. Schmidt, Klaus-Dieter, 1997. "Corporate restructuring and export performance in the transition process: The case of Eastern Germany," Kiel Working Papers 845, Kiel Institute for the World Economy (IfW Kiel).

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    JEL classification:

    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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