Product Policy and the East-West Productivity Gap: Evidence from German Manufacturing Firms

After 20 years of transition from an economy integrated in an exchange scheme of planned economies towards an open market economy based on the ideas of competition, we ask whether East German firms succeeded in finding their place in the international division of labour. We concentrate on the question, to what extent they have caught up with the productivity level of their Western counterparts of similar size and sector and how this productivity difference is related to changes in their product policy. We analyse these questions with a unique data set provided by Statistics Germany that contains both product policy and productivity information for individual manufacturers from both parts of the country. Using a decomposition approach suggested by Nopo (2008) as a nonparametric extension of the widely-used Oaxaca-Blinder methodology (Blinder 1973; Oaxaca 1973) we find that the time span from 1995 - 2004 has two component periods: a period of adaptation from 1995 to 2001and a period of branding from 2002 to 2004. The initial period is characterized by a smaller share of Eastern firms that modify their product range and by a large productivity gap of Eastern Non-Modifiers if compared to Western Non-Modifiers of comparable size and sector. The evidence for the second period, however, points to a more active and established role of East German manufacturers: more of them alter their product range and step up their productivity performance.Productivity, product policy, decomposition, transition economies

The development of Berlin's industrial firms 2003 to 2012 in comparison to German agglomerations, giving particular attention to employment dynamics and the modernisation of the industrial product portfolio

Die Arbeit befasst sich mit strukturellen Wandlungsprozessen der deutschen Industrie, wobei der Schwerpunkt auf regionale Unterschiede gelegt wird. Berlin, welches im Zuge der Wiedervereinigung sowohl einen ehemaligen West- als auch einen ehemaligen Ostteil und damit zwei Gebiete mit völlig unterschiedlichen Ausgangsbedingungen umfasst, steht im Fokus der Analyse. Durch den Zusammenbruch der planwirtschaftlich organisierten Industrie in Berlin-Ost und der hoch subventionierten Produktion im Westteil stand die Berliner Industrie unter besonderem Anpassungsbedarf. Die Folge war ein massiver Arbeitsplatzabbau in den Nachwendejahren. Ob die deutsche Teilung auf dem Arbeitsmarkt nachwirkt und wie sich die Umwandlungs- und Erneuerungsprozesse in der Industrie in Ost- und Westdeutschland unterscheiden, ist eine der zentralen Fragen dieser Arbeit. Die Entwicklungen in Berlin werden mit denen in traditionellen Westmetropolen und den anderen beiden großen ostdeutschen Städten Dresden und Leipzig verglichen. In der Nachwendezeit ist in Berlin eine einzigartige Wissenschaftslandschaft entstanden. Universitäten, Hochschulen und Forschungseinrichtungen bieten grundsätzlich auch Standortvorteile für die Berliner Wirtschaft und somit Chancen für ein Beschäftigungswachstum. Die Analyse der Frage, ob diese Standortvorteile positive Effekte zeitigen konnten, ist ebenfalls Gegenstand dieser Arbeit. Unter Verwendung von Mikrodaten der amtlichen Statistik werden die Fragestellungen auf der In- und der Outputseite analysiert: Auf der Inputseite wird der Arbeitskräfteeinsatz mit der Analyse der Arbeitsplatzdynamik betrachtet; die Outputseite wird anhand von strukturellen Entwicklungen auf der Produktebene untersucht. Die Analyse der Produktdiversifizierung im Regionalvergleich erfolgt durch einen Dekompositionsansatz. Voraussetzung für die Beantwortung dieser Fragestellungen ist das Vorhandensein einer soliden Datenbasis, die einen längeren Zeitraum abdeckt. Durch Veränderung im Erhebungsprogramm der amtlichen Statistik steht für die angestrebte Analyse keine Totalerhebung zur Verfügung. Um die Fragestellungen trotzdem zu bearbeiten, wurde durch eine Kombination verschiedener Statistiken und dem Unternehmensregister eine umfassende Analysegrundlage geschaffen. Im Ergebnis deuten die Regionalvergleiche auf den Beginn eines Wachstumsprozesses in der Berliner Industrie in den Jahren seit 2008 hin, wobei die Beschäftigungszuwächse im Wesentlichen aus wachsenden Bestandsbetrieben resultierten. Wachstumstreiber waren bestehende Industriebetriebe der Spitzen- und hochwertigen Technologien. Diese positive Entwicklung weist darauf hin, dass Berlin mit seiner vielfältigen und hochentwickelten Wissenslandschaft gute Entwicklungsbedingungen für wissens- und technologieintensive Betriebe bietet. Die Ergebnisse aus den input- und outputbezogenen Analysen zeigen, dass der transformationsbedingte Aufholprozess beendet ist.The thesis deals with structural change processes in German industry, with a focus on regional differences. The analysis focuses on Berlin, which in the course of reunification comprises both a former western and a former eastern part and thus two areas with completely different starting conditions. Due to the collapse of both the state-directed economy in the eastern part of Berlin and the highly subsidised production in the western part, Berlin's industry was in particular need of adjustment. The result was a massive loss of jobs in the postreunification years. One of the central questions in this study is, whether the partition of Germany continues to have an impact on the labour market and how the processes of conversion and renewal in industry differ between East and West Germany. The developments in Berlin are compared with those in traditional western agglomerations and the other two large eastern German cities of Dresden and Leipzig. In the post-reunification period, a unique scientific communitiy has emerged in Berlin. Universities, colleges and research institutions offer fundamental location advantages for Berlin's economy and thus opportunities for employment growth. The analysis of whether these locational advantages have had positive effects, is also the subject of this study. Using micro data from official statistics, the input and output side of economy are analysed: On the input side, labour is considered within an analysis of workplace dynamics. The output side is analysed by means of structural developments at product level. A nonparametric decomposition approach is used to analyse product diversification in a regional comparison. In order to answer the research objectives, a solid data base over a longer period of time is needed. Due to changes in the survey programme of official statistics, a total survey was not available for the intended analysis. Therefore a comprehensive basis for the planned analysis was created by combining various economic statistics and the business register. The conducted regional comparisons show the beginning of a growth process in Berlin's industry, starting in the years since 2008, where employment increases result mainly from existing businesses, which are growing. Economic growth was driven mostly by industrial firms in the cutting-edge and high-grade technology sectors. This positive development illustrates that Berlin, with its diverse and highly developed knowledge landscape, offers good development conditions for knowledge- and technology-intensive companies. However, the results of the inputand output-related analyses show that the transformation-related catching-up process is over

Product policy and the East-West productivity gap

After 20 years of transition from an economy integrated in an exchange scheme of planned economies towards an open market economy based on the ideas of competition, we ask whether East German firms succeeded in finding their place in the international division of labour. We concentrate on the question, to what extent they have caught up with the productivity level of their Western counterparts of similar size and sector and how this productivity difference is related to changes in their product policy. We analyse these questions with a unique data set provided by Statistics Germany that contains both product policy and productivity information for individual manufacturers from both parts of the country. Using a decomposition approach suggested by Nopo (2008) as a nonparametric extension of the widely-used Oaxaca-Blinder methodology (Blinder 1973; Oaxaca 1973) we find that the time span from 1995-2004 has two component periods: a period of adaptation from 1995 to 2001and a period of branding from 2002 to 2004. The initial period is characterized by a smaller share of Eastern firms that modify their product range and by a large productivity gap of Eastern non-modifiers if compared to Western non-modifiers of comparable size and sector. The evidence for the second period, however, points to a more active and established role of East German manufacturers: more of them alter their product range and step up their productivity performance.Productivity, Product Policy, Decomposition, Transition Economies

Product policy and the East-West productivity gap

After 20 years of transition from an economy integrated in an exchange scheme of planned economies towards an open market economy based on the ideas of competition, we ask whether East German firms succeeded in finding their place in the international division of labour. We concentrate on the question, to what extent they have caught up with the productivity level of their Western counterparts of similar size and sector and how this productivity difference is related to changes in their product policy. We analyse these questions with a unique data set provided by Statistics Germany that contains both product policy and productivity information for individual manufacturers from both parts of the country. Using a decomposition approach suggested by Nopo (2008) as a nonparametric extension of the widely-used Oaxaca-Blinder methodology (Blinder 1973; Oaxaca 1973) we find that the time span from 1995-2004 has two component periods: a period of adaptation from 1995 to 2001and a period of branding from 2002 to 2004. The initial period is characterized by a smaller share of Eastern firms that modify their product range and by a large productivity gap of Eastern non-modifiers if compared to Western non-modifiers of comparable size and sector. The evidence for the second period, however, points to a more active and established role of East German manufacturers: more of them alter their product range and step up their productivity performance

Eastern Germany on the brink of closing the productivity gap? Firm level evidence from manufacturing

After 20 years of transition, productivity in Eastern Germany is still considerably below the Western level. We study the development of the East–West productivity gap at the firm level and link it to firms’ product policy. Redesigning their product range was a major challenge for Eastern enterprises as they sought their place in the international division of labour. Based on data from manufacturing we apply a non-parametric extension of the widely used Oaxaca–Blinder method to decompose the average East–West productivity difference. By running separate decompositions for modifiers and non-modifiers of the product range we study the impact of product policy on the productivity gap. We find that the time span 1995–2004 has two component periods: a period of adaptation from 1995 to 2001 and a period of branding from 2002 to 2004. The initial period is characterised by a smaller share of Eastern firms that modify their product range and by a large productivity gap between Eastern and Western non-modifiers of comparable size and sector. The evidence for the second period, however, points to a more active and established role of Eastern German manufacturers: more of them alter their product range and step up their productivity performance.