Working Paper: CEPR ID: DP895
Authors: Nienke Beintema; Bart van Ark
Abstract: We provide comparisons between East and West Germany before reunification of relative levels of output per hour in manufacturing industries. The comparisons are based on the industry of origin approach which makes use of information on value added and employment derived from production statistics. Output is converted to a common currency with unit value ratios which are based on values at producer prices for individually matched products. This study shows that for the manufacturing sector as a whole, value added per hour worked in East Germany was 28.6% of the level in West Germany in 1987. The comparative productivity performance in food products and beverages and in chemicals in East Germany is well above this average, but the productivity level in machinery and equipment is below 20% of the West German level. The study deals with the problems involved with quality differences, and it discusses the reasons for the more unfavourable performance of East Germany when based on comparisons of value added rather than gross output. We conclude with a discussion of the changes in comparative output and productivity performance in the past five decades. It appears that even after adjustments of the East German time series on real output in manufacturing to a factor cost standard, the comparative productivity level of East Germany in 1950 extrapolated backwards from 1987 would tend to be unrealistically low compared to earlier benchmarks. This calls for a more detailed study of East German growth between 1947 and 1990 as well as for more historical benchmark comparisons between the two regions.
Keywords: labour productivity; manufacturing; comparative performance
JEL Codes: N10; N60; O47; O57
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Efficiency of intermediate inputs (D24) | Comparative productivity performance (O57) |
| Structural differences in the manufacturing sectors (L69) | Comparative productivity performance (O57) |
| Value added per hour worked in West Germany (J39) | Value added per hour worked in East Germany (J39) |
| Overall average productivity (E23) | Productivity in food products and beverages and chemicals (L66) |
| Productivity in West Germany (O49) | Machinery and equipment productivity (L64) |
| Higher proportion of intermediate inputs per unit of output (D24) | Comparative productivity performance (O57) |
| Potential quality adjustment issues (L15) | Lower productivity in East Germany (O49) |