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A Study of the Competitiveness of Regions based on a Cluster Analysis: The Example of East Germany

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  • Kronthaler, Franz

Abstract

This paper examines whether some East German regions have already achieved the same economic capability as the regions in West Germany, so that they are on a competitive basis with the West German regions and are able to reach the same economic level in the long run. If this is not the case, it is important to know more about the reasons for the economic weakness of the East German regions twelve years after unification. The study is based on a cluster analysis. Criteria for the cluster formation are several economic indicators, which provide information about the economic capability of regions. The choice of the indicators is based on a review of results of the theoretical and empirical literature on the new growth theory and new economic geography. The results show that most of the East German regions have not yet reached the economic capability and competitiveness of their West German counterparts so that they - from the viewpoint of the new growth theory and the new economic geography - are not in the position to reach the same economic level. According to these theories economic disadvantages are most notably the consequences of less technical progress, a lack of entrepreneurship and fewer business concentration. Under these points it is especially noteworthy that young well educated people leave these East German regions so that human capital might will turn into a bottle-neck in the near future. Only a few regions in East Germany - those with important agglomerations - are comparable to West German regions that are characterised by average capability and competitiveness, but not to those with above average economic capability and competitiveness. Even those more advanced East German regions still suffer from a slower technical progress. There are important policy implications based on these results: regional policy in East Germany was not able to assist raising all regions to a sufficient level of competitiveness. It may be more effective to concentrate the regional policy efforts on a selection of important agglomerations. This has also strong implications for the EU regional policy assuming that the accession countries will have similar problems in catching up to the economic level of the EU as have the East German regions.

Suggested Citation

  • Kronthaler, Franz, 2003. "A Study of the Competitiveness of Regions based on a Cluster Analysis: The Example of East Germany," IWH Discussion Papers 179/2003, Halle Institute for Economic Research (IWH).
    • Handle: RePEc:zbw:iwhdps:iwh-179
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    Cited by:

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    3. Massimo Aria & Giuseppe Lucio Gaeta & Ugo Marani, 2019. "Similarities and Differences in Competitiveness Among European NUTS2 Regions: An Empirical Analysis Based on 2010–2013 Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 142(1), pages 431-450, February.
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    6. Stefan Arent & Wolfgang Nagl, 2011. "Unemployment Benefit and Wages: The Impact of the Labor Market Reform in Germany on (Reservation) Wages," ifo Working Paper Series 101, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    7. Wolfgang Nagl & Stefan Arent, 2012. "Unemployment Benefits and Wages: Evidence from the German Hartz-Reform," ERSA conference papers ersa12p78, European Regional Science Association.
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    More about this item

    Keywords

    regional disparities; competitiveness; cluster analysis; East Germany; EU-enlargement;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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