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The Extent and Evolution of Productivity Deficiency in Eastern Germany

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  • Dirk Czarnitzki

Abstract

Since the German re-unification in 1990, Eastern Germany has been a transition economy. After a phase of catching up in productivity with Western Germany from 1991 to 1996, growth rates in the producing sector have dropped below those in Western Germany since 1997. This study investigates whether this macroeconomic picture holds at the microeconomic level. For the special case of Eastern Germany, I suggest identifying productivity gaps by using comparable Western German firms as a “productivity benchmark”. Applying an econometric matching procedure allows to study the productivity gap at the firm level in detail. Besides labor and capital, other factors like innovation and firm ownership are taken into account. The macroeconomic facts are broadly confirmed: a significant gap has remained in recent years. Moreover, Eastern German innovators perform worse than their Western German pendants, and firms owned by Western German or foreign companies perform better than those owned by Eastern German entities. Copyright Springer Science+Business Media, Inc. 2005

Suggested Citation

  • Dirk Czarnitzki, 2005. "The Extent and Evolution of Productivity Deficiency in Eastern Germany," Journal of Productivity Analysis, Springer, vol. 24(2), pages 211-231, October.
    • Handle: RePEc:kap:jproda:v:24:y:2005:i:2:p:211-231
    DOI: 10.1007/s11123-005-4706-0
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    References listed on IDEAS

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    1. Hans-Werner Sinn, 2003. "The Laggard of Europe (CESifo Forum Vol. 4, Special Issue No. 1)," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 4(SPECIALIS), pages 01-32, October.
    2. Hans-Werner Sinn, 2003. "The Laggard of Europe (CESifo Forum Vol. 4, Special Issue No. 1)," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 4(05), pages 01-32, October.
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    More about this item

    Keywords

    productivity gap; eastern germany; non-parametric matching; C14; D24;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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