Industrial policy and the East German productivity puzzle

Henning Klodt

No 943, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Catching-up of East German productivity to West German levels has completely faded out sinde the mid 1990s. The remaining productivity gap cannot be attributed to an inferior capital endowment. Instead, it appears to be the result of an inappropriate design of industrial policy which fostered the specialization of East German industry on capital intesive smoke-stack industries. These industries are absorbing a large share of factor inputs, whereas their contribution to aggregate output is rather limited. East Germany will have to face, therefore, another wave of painful structural adjustment when public subsidies will further be reduced.

JEL-codes: D24 L16 L52 (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:943

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