Allocative efficiency, plant dynamics and regional productivity: Evidence from Germany

Simon Bruhn and Thomas Grebel

No 172, Ilmenau Economics Discussion Papers from Ilmenau University of Technology, Institute of Economics

Abstract: This paper argues that regional variation in the efficiency of labor allocation among German manufacturing plants plays a critical role in explaining regional disparities in productivity. In fact, we show that over 50% of the East-West productivity gap is associated with a less efficient labor allocation in former East Germany. Yet, we also demonstrate that the mere focus on East-West comparisons hides partially large differences between the German federal states. These results suggest that regional productivity differences could be substantially narrowed by a more efficient labor allocation among plants. With respect to the underlying causes, we find evidence that the regional differences in allocative efficiency are significantly correlated with differences in export intensity, market concentration and plant size.

Keywords: Regional productivity gap; productivity decomposition; allocative efficiency; labor allocation (search for similar items in EconPapers)
JEL-codes: E24 J24 L11 L25 O47 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-eff, nep-eur, nep-geo, nep-lma and nep-ure
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Related works:
Journal Article: Allocative Efficiency, Plant Dynamics and Regional Productivity: Evidence from Germany (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuiedp:172

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