Martin Gornig

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.

Deindustrialization and the Polarization of Household Incomes: The Example of Urban Agglomerations in Germany

The tertiarization, or perhaps more accurately, the deindustrialization of the economy has left deep scars on cities. It is evident not only in the industrial wastelands and empty factory buildings scattered throughout the urban landscape, but also in the income and social structures of cities. Industrialization, collective wage setting and the welfare state led to a stark reduction in income differences over the course of the twentieth century. Conversely, deindustrialization and the shift to tertiary sectors could result in increasing wage differentiation. Moreover, numerous studies on global cities, the dual city, and divided cities have also identified income polarization as a central phenomenon in the development of major cities. Using data from the German Socio-Economic Panel (SOEP), we find an increasing polarization of household income structures since the mid-1990. In agglomerations, this income polarization is even more pronounced than in the more rural regions. The income polarization in Germany is likely to have multiple causes, some of which are directly linked to policies such as the deregulation of the labor market. But extensive deindustrialization is probably also one of the drivers, that has led directly to the weakening of middle income groups.

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.

Deindustrialisation and the polarisation of household incomes: The example of urban agglomerations in Germany

The tertiarisation, or perhaps more accurately, the deindustrialisation of the economy has left deep scars on cities. It is evident not only in the industrial wastelands and empty factory buildings, but also in the income and social structures of cities. Industrialisation, collective wage setting, and the welfare state led to a stark reduction in income differences over the course of the 20th century. Conversely, deindustrialisation and the shift to tertiary sectors could result in increasing wage differentiation. Moreover, numerous studies on global cities, the dual city, and divided cities have also identified income polarisation as a central phenomenon in the development of major cities. Using data from the German Socio-Economic Panel (SOEP), we find an increasing polarisation of household income structures since the mid-1990s. In urban agglomerations, this income polarisation is even more pronounced than in the more rural regions. The income polarisation in Germany is likely to have multiple causes, some of which are directly linked to policies such as the deregulation of the labour market. But extensive deindustrialisation is probably also one of the drivers of this process, and it has directly weakened Germany’s middle-income groups.

Why is TFP growth sectorally concentrated

Research shows that total factor productivity (TFP) growth is weak in European countries. This is inter alia attributed to the fact that substantial TFP growth is limited to a few industries. Because TFP growth is typically understood as technological progress, it is concluded that technology diffusion between sectors in Europe is hampered. We use EU KLEMS data sets to decompose sectoral TFP for nine European countries by means of a Malmquist approach in order to identify potential sources besides technical progress. Applying Harberger diagrams, we describe the sectoral distribution of TFP growth, efficiency gains and losses, economies of scale and technological progress. The analysis reveals that technological progress is quite evenly distributed across sectors in most European countries. The wide scattering of TFP growth is explained by deviating efficiency developments and the unused economies of scale. We conclude that the technology transfer between sectors in most European countries seems to work. Therefore, Europe in general does not need a new technology policy, but a further integration of the markets and a reduction of national market entry barriers. This requires further unification of pan-European standards in fields like trade and crafts codes or consumer protection policies.

Einkommensverteilung und Siedlungsstruktur

Eine regionale Differenzierung bei der Analyse der Einkommensverteilung wird innerhalb der empirischen Wohlfahrtsforschung meist nur als Unterscheidung zwischen Ost- und Westdeutschland angewandt, insbesondere bei der Untersuchung von Niedrigeinkommen und Armutsrisiken. Die Unterschiedlichkeit des Armutsrisikos in Ost- vs. Westdeutschland und deren zeitliche Entwicklung steht hierbei meist im Fokus. Dieser gut untersuchte Prozess der beiden Einkommensverteilungen in Ost- und Westdeutschland lasst sich in zwei Phasen unterteilen: Angleichung und Divergenz. Nach der Vereinigung in der ersten Halfte der 1990er Jahre erfolgten deutliche Angleichungsfortschritte, die im Laufe der zweiten Halfte der 1990er Jahre sich immer weiter verlangsamten. In der zweiten Phase direkt nach dem Jahrtausendwechsel nahmen die Einkommensabstande sogar wieder zu (Goebel et al. 2007).

Bestimmt die wirtschaftliche Dynamik der Städte die Intensität der Einkommenspolarisierung

Die großen europäischen Städte unterliegen seit den 1970er Jahren einem sozioökonomischen Strukturwandel, der sowohl das Städtesystem als auch die innere Struktur der Städte tangiert. Stadtentwicklung ist heute nicht mehr überall identisch mit Wachstum: Einigen weiterhin prosperierenden Städten steht eine wachsende Zahl schrumpfender Städte gegenüber. Ein einheitliches Modell von Stadtentwicklung, das auf Zunahme von Bevölkerung und Arbeitsplätzen sowie steigenden Realeinkommen beruhte, existiert zumindest in den OECD-Ländern nicht mehr. Die Pfade der Stadtentwicklung werden nicht nur zwischen den Städten unterschiedlicher, sondern auch innerhalb der Städte vergrößern sich die Differenzen zwischen den Lebenslagen und Lebenschancen ihrer Bewohner. Angesichts dieser Tendenzen muss man daher von einer doppelten Spaltung sprechen: einer Spaltung zwischen den Städten und einer Spaltung innerhalb der Städte. Mit einem wachsenden Anteil von Dienstleistungstätigkeiten auf dem Arbeitsmarkt – so die These – nimmt die Einkommensungleichheit zu. Entweder wird ein großer Teil der Arbeitskräfte, die früher Fabrikarbeiter waren, aus dem Arbeitsmarkt in die Dauerarbeitslosigkeit abgedrängt – oder aber es wird eine Vollbeschäftigung angestrebt, die nur dann annähernd erreicht werden kann, wenn die Regulierungen von Arbeitsmarkt und Gewerbe einen größeren Niedriglohnsektor zulassen und jene neue Schicht in der Erwerbstätigkeit entsteht, die bisher in deutschen Städten keine große Rolle gespielt hat: diejenigen, die voll arbeiten, aber von ihrer Arbeit nicht leben können, die »working poor«. Von Arbeitslosigkeit und Niedriglohn sind insbesondere die älteren Arbeitnehmer und die gering Qualifizierten betroffen, wozu viele Migranten zählen. Die zunehmende Tertiarisierung schafft Potentiale für eine höhere Lohndifferenzierung.1 Einfache Dienstleistungen mit geringen Möglichkeiten für Produktivitätssteigerungen nehmen nur dann zu, wenn ihre Entlohnung relativ zur Gesamteinkommensentwicklung zurückbleibt. Hochwertige Dienstleistungen können dagegen auch bei steigenden Löhnen expandieren, da Lohnkostenerhöhungen durch Produktivitätssteigerungen kompensiert werden können. Im Tertiarisierungsprozess entstehen dann parallel sowohl relativ schlecht entlohnte einfache Dienstleistungs1.