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German industrial policy: An overview

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  • Vitols, Sigurt

Abstract

Despite intense study as an attractive model for adjustment to slower worldwide growth and increasing competition from low-wage producers, the sources of German institutional comparative advantage remain controversial, particularly with regard to the role of the national state. This paper argues that the national state plays a key -- though mainly indirect -- role in supporting the modernization of industry. On the one hand, the national regulation of labor markets has discouraged price competition and imposed a "productivity whip" on companies; on the other hand, through the supply of resources to sub-national and sectoral actors, the federal government has supported the investments in skills, R&D and capital equipment needed for industrial modernization. This support of an institutional infrastructure is particularly important for the large and modern SME sector (the Mittelstand). The 1990s illustrate both the continued success of this infrastructure in supporting adjustment and the ultimate dependency of these institutions on strong domestic political support and adequate international demand for high quality, medium-tech products.

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  • Vitols, Sigurt, 1996. "German industrial policy: An overview," Discussion Papers, Research Unit: Economic Change and Employment FS I 96-321, WZB Berlin Social Science Center.
    • Handle: RePEc:zbw:wzbece:fsi96321
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    Cited by:

    1. Hancké, Bob & Coulter, Steve, 2013. "The German manufacturing sector unpacked: institutions, policies and future trajectories," LSE Research Online Documents on Economics 56090, London School of Economics and Political Science, LSE Library.
    2. Bernhard Seliger, 2000. "The German manufacturing industry faces globalization: Old achievements, new challenges," Global Economic Review, Taylor & Francis Journals, vol. 29(2), pages 48-64.
    3. Adleberger, Karen, 1999. "A Developmental German State? Explaining Growth in German Biotechnology and Venture Capital," UCAIS Berkeley Roundtable on the International Economy, Working Paper Series qt8z55s60f, UCAIS Berkeley Roundtable on the International Economy, UC Berkeley.

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