Bernd Görzig

Explaining Eastern Germany's Wage Gap: The Impact of Structural Change

Since Eastern Germanys conversion to a market economy wages have remained considerably below the West German wage level. This article looks at the role of establishment-specific factors—such as sectoral affiliation and size of the labour force—in this process. A non-parametric decomposition that has played a prominent role in the gender wage gap literature is applied to breakdown the East–West wage gap into its constituent components. Using establishment data from German employment statistics, the article demonstrates that the catching-up process of Eastern Germanys wage level is hindered by the shift in its economic structure towards lower-paying types of companies, which has caused the lagging behind in the adjustment of wages.

Firm Wage Differentiation in Eastern Germany a Non-Parametric Analysis of the Wage Spread

In Eastern Germany, wage differentiation between firms has clearly grown, parallel to individual wage differentials. Nevertheless, the wage spread between firms is still much less than in Western Germany. In this paper, a non-parametric decomposition is used to analyze the difference between the wages spread in the two parts of Germany. Only part of the difference can be explained by different economic structures in Eastern Germany. By far, the greater part of the difference in the wage spread between firms in the two parts of the country is due to the fact that differences in wages paid by firms of the same type in Eastern Germany are much less than those of their counterparts in Western Germany. A striking result of the analysis is that the gap in the wage variance between Eastern and Western Germany is increasing.

Produktdiversifizierung: Konvergenz zwischen ost- und westdeutschen Unternehmen / Product Diversification: Have East-German Enterprises Caught-Up with the West?

Summary In the aftermath of Germany’s reunification, redesigning their product range was a major challenge for East-German enterprises. At the same time, there were growing signs that Western enterprises reacted to globalization and European integration by increasingly pursuing strategies of specialization. Using representative micro data from Germany’s system of register based, official firm surveys, this paper studies how manufacturing enterprises from both parts of the country reshaped their product policies in recent years. Our analysis reveals a common trend towards greater specialization during the period from 1995 to 2001. This process of focusing on their core competencies and reducing their range of products was more pronounced in the East - most likely as a result of the increased integration of Eastern firms into international markets. We apply a nonparametric decomposition that yields estimates of the structural and regional components of the West-East gap. We find that in 2001 no significant gap remains among Eastern and Western enterprises of a similar, comparable type. However, there still exist pronounced structural differences. In particular, in 2001 East Germany is still lacking the large firms in many industries that push up the level of West German product diversification and economic performance.

Diversifizierungsstrategien deutscher Unternehmen

ZusammenfassungIn der Untersuchung geht es um die Kontroverse, ob Spezialisierung oder Diversifizierung die erfolgreichere Strategie für deutsche Unternehmen ist. Zudem werden die Auswirkungen der beiden Strategien auf Beschäftigung und Wachstum analysiert. Es wird deutlich, dass mit der Öffnung der Märkte und der zunehmenden Handelsliberalisierung der bisherige Trend zur Diversifizierung zu Ende gegangen ist. Seit der Mitte der neunziger Jahre kann im Durchschnitt der Unternehmen eine zunehmende Produktspezialisierung beobachtet werden. Hinter diesem Prozess stehen allerdings gegenläufige Entwicklungen. Trotz allgemeiner Spezialisierungstendenz gibt es weiterhin expansive Unternehmen, die ihre Produktpalette ausweiten. In Hinblick auf Beschäftigung und Umsatz wird der Einfluss dieser Unternehmen aber mehr als kompensiert durch Unternehmen, die verstärkt spezialisieren. Dabei sind beide Unternehmenstypen erfolgreicher als jene Unternehmen, die keine Veränderungen in ihrer Produktpalette vornehmen. Unternehmen mit einer Ausweitung der Produktpalette wachsen stärker. Unternehmen, die sich spezialisieren, weisen eine besonders starke Verbesserung ihrer Ertragssituation auf. AbstractThis paper is dealing with the controversial question, whether German enterprises are more successful through specialisation or through diversification. In addition, the effects of both strategies on employment and economic growth are shown. The analysis confirms that with the opening of the markets and liberalisation of trade the previous secular trend towards diversification declined. For the average German enterprise an increase of product-specialisation can be observed since the middle-nineties. Behind this process, developments in opposite directions can be found. Despite the overall tendency towards specialisation, there are still expansive firms enlarging their range of products. However, with regard to employment and turnover the impact of these firms is overcompensated by those that are specialising. Both types of enterprises are more successful than those which do not at all modify their product line. Enterprises which enlarge their range of products are growing to a greater extent, while those which are specialising show a highly improved profit situation.

Intangibles, Can They Explain the Dispersion in Return Rates?

It is argued that the observed return rates on capital at firm-level have an upward bias if firms are producing with unobserved intangible capital. Using EUKLEED, a comprehensive firm level data base for Germany, this theoretical preposition is proved empirically. Furthermore, making unobserved capital observable the dispersion in return rates reduces dramatically. The results clearly support the assumption that a considerable part of the observed dispersion in return rates among firms can be contributed to unobserved capital formation in intangible capital. Firms with high input in intangibles also have an above average observed rate of return. However, the question to what extent a more intense use of intangibles can be the cause for higher return rates in the sense of both the monopoly-based and the innovation-based explanations is not answered.

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.

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.

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.

Produktdiversifizierung: Haben die ostdeutschen Unternehmen den Anschluss an den Westen geschafft?

Die Gestaltung der Produktpalette war ein zentrale Herausforderung fur ostdeutsche Unternehmen nach der Wende. Spezialisierung oder eine diffuse Generalistenstrategie war die Frage. Welche Strategie sich durchgesetzt hat und ob der Anschluss an den Westen gelang, wird in dieser Arbeit erstmals auf reprasentativer Basis fur das verarbeitende Gewerbe mit den Mikrodaten der amtlichen Statistik untersucht. Mit einem nichtparametrischen Dekompositionsansatz wird das West-Ost-Diversifizierungsgefalle 1995 und 2001 in einen reinen Regionaleffekt und in strukturelle Komponenten zerlegt. Dabei zeigt sich, dass bei vergleichbaren Unternehmen heute keine signifikanten West-Ost-Unterschiede mehr im Produktdiversifizierungsverhalten bestehen. Pragnant sind aber weiterhin strukturelle Unterschiede – wie das Defizit an hochdiversifizierten Grosunternehmen.