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The East-West German gap in revenue productivity:Just a tale of output prices?

Matthias Mertens and Steffen Mueller

Journal of Comparative Economics, 2022, vol. 50, issue 3, 815-831

Abstract: East German manufacturers’ revenue productivity is substantially below West German levels, even three decades after German unification. Using firm-product-level data with product quantities and prices, we analyze the role of product specialization and show that the prominent “extended work bench hypothesis” cannot explain these sustained productivity differences. Eastern firms specialize in simpler product varieties generating less consumer value and being manufactured with less or cheaper inputs. Yet, such specialization cannot explain the productivity gap because Eastern firms are physically less productive for given product prices. Hence, there is a genuine price-adjusted physical productivity disadvantage of Eastern compared to Western firms.

Keywords: Regional productivity gap; Physical productivity; Product prices; Product specialization; German unification (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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Working Paper: The East-West German gap in revenue productivity: Just a tale of output prices? (2020) Downloads
Working Paper: The East-West German gap in revenue productivity: Just a tale of output prices? (2020) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:50:y:2022:i:3:p:815-831

DOI: 10.1016/j.jce.2022.04.001

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