New East Germany‟s Economy on the Path from Transition to …œирко... · 2011. 5. 30. ·...
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Halle Institute
for Economic Research
East Germany‟s Economy on the Path from Transition to European
Integration: Achievements, Shortcomings and Challenges
Mirko Titze (in cooperation with Gerhard Heimpold)
Halle Institute for Economic Research, Postbox 11 03 61, D-06017 Halle (Saale),
Telephone: +49 (345) 7753 861, Fax: +49 (345) 7753 820, Email: [email protected].
Halle Institute
for Economic ResearchIntroduction
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 2
Personal background:
• Born 1974 in Eisenhüttenstadt (former
GDR) (see the map)
• Attendance of a school in the
hometown named after Juri Gagarin
• Aged 14 when the “Iron Curtain” fell
down
• Eisenhüttenstadt is closely linked with
the metallurgical plant located there
• This town/plant is an example for the
establishment of industries in the GDR
as a consequence of the German
division after World War 2 and the
beginning of the Cold War period
• After German unification it was difficult
to maintain these industrial cores
FRG
GDR Oder
Neisse
* The authors thank Mr. Michael Barkholz, Dept. Formal Methods and Databases, IWH, for producing the maps included in this presentation.
Source: Mapping
by IWH.*
Divided Germany (1949-1990)
Halle Institute
for Economic ResearchIntroduction
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 3
Main street and the plant
Town hall (built in the 50ies)
Source: Eisenhüttenstadt„s official website (www.eisenhuettenstadt.de)
Halle Institute
for Economic ResearchIntroduction
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 4
Appartments (built in the 50ies)
Theater (built in the 50ies)
Source: Eisenhüttenstadt„s official website (www.eisenhuettenstadt.de)
Halle Institute
for Economic ResearchIntroduction
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 5
Some short facts about Eisenhüttenstadt (see EKO Stahl GmbH [ed.] 2000):
• German metallurgical capacities before World War 2 = located in the western part
(Ruhr area)
• German division and hindered trade = establishment of metallurgical capacities in the
GDR
• It was a military strategic decision to establish such plant at the Oder-Neisse border =
this location represented the longest distance to the iron curtain
• “Official” motivation for the location‟s decision: locational advantages in terms of
transportation costs: crude and lime from Poland and ore from the Soviet Union
• 1951: start up for the construction of an iron and steel plant = technical experts from the
USSR supported the built up of the plant
• 1951: foundation of the residential town = “first socialist town” in Germany
• Permanent development of the plant to a large-scaled trust “Kombinat”
• Economic disadvantage in the late 1980ies: technological gap = technological
capacities of an integrated steel manufacturer have not been completed. There was a
lack of production capacities for hot-rolled strips. This required high transportation
(railway) capacities: Steel was transported to hot strip mills in the FRG or the Soviet
Union, after hot rolling back to Eisenhüttenstadt.
Halle Institute
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Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 6
What has happened after 1990 (see for example EKO Stahl GmbH [ed.] 2000):
• Modernization of production capacities (capital stock)
• Maintaining (of a reduced number) of jobs at production location Eisenhüttenstadt
• Successful privatisation = today part of a multinational enterprise → ArcelorMittal
• Reduction of employment to 2 413 (plus 3000 in connected industries) employees in
2010 (1989: 11 934)
• High productivity = the plant is highly competitive at world market
• EU enlargement lead to home market effects = EKO as entry to the CEE markets
Some shortcomings still occur:
• The headquarter in Luxembourg coordinates main functions
• Production site Eisenhüttenstadt: rather production related R&D (e. g. quality
management) than R&D in the broadest sense
• The regional network has emerged relatively weak = the plant receives intermediates
supraregionally and it supplies its products supraregionally
• Production related services in regional connected industries
Halle Institute
for Economic ResearchIntroduction
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 7
Initial situation in East Germany at the beginning of the 1990ies (Deutscher Bundestag
1998; Sächsisches Staatsministerium für Wirtschaft und Arbeit 1993, pp. 32-45):
- enterprise sector and public infrastructure: obsolete capital
stock;
- over-dimensioned (overstaffed) manufacturing sector while
service sector is underrepresented;
- business “landscape” characterized by inefficient
large-scale trusts (“Kombinate”) while SME were rare.
The division into East and West Germany has led to an economic structure in the GDR
including numerous distortions which hardly were competitive when the wall came down
(Boltho, Carlin & Scaramozzino 1999)
Case of German Unification is not only a case of economic integration; it is a case of
transformation from a centrally planned economy to a market economy, too.
Halle Institute
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Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 8
The structural break after the unification:
Introduction
-40,0
-30,0
-20,0
-10,0
0,0
10,0
20,0
1986 1987 1988 1989 1990
PercentYearly growth rates (in %) of important sectors
in East Germany
Energy and fuels
Chemicals
Machinery and vehicles
Electrical machinary and apparatus
Food products
Manufacturing
Source: DIW Berlin, IfW (1991): Gesamtwirtschaftliche und unternehmerische Anpassungsprozesse in Ostdeutschland. Erster Bericht, in: Kiel Discussion Papers 168, March, p. 4 (Primary Sources: Statistical Office of the GDR and Federal Statistical Office, FRG).
Halle Institute
for Economic ResearchIntroduction
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 9
Steps of transition
1) Monetary union (1st of July 1990)
2) Formal unification (3rd of October 1990)
3) Implementation of the West German legal framework
• (Re)establishment of 5 „new“ federal states
• Delegation of responsibilities to the regional level = principle of subsidiarity (more
responsibilities on the federal state level and the municipality level)
• Privatisation of state owned enterprises
4) Implementation of the West German social system (including the health system)
5) Comprehensive programmes for the renewal of public infrastructure
6) Comprehensive programmes for the stabilisation of the business sector = ensuring the
competitiveness of East German enterprises
• Support of investment = investment grants, tax revenues, loans
• Support of private R&D activities = grants
• Support for start ups
• Other support schemes
To ensure equivalent living conditions transfer payments from West to East Germany
within the period from 1991 to 2005 in an amount of more than 1 000 Billions of Euro
were conducted = mostly for the social insurance system (Blum et al. 2009)
Halle Institute
for Economic ResearchAchievements
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 10
What has been achieved?
Economic and social development in East Germany shows numerous positive changes:
• modernized infrastructure
large investment in the public research and education sector,
improvement of roads/highways and railroad tracks,
high standard in the health care system,
development of the urban wastewater treatment system,
• the modernization of the firms‟ capital stock
• Signs of re-industrialisation → manufacturing industries have been “motors” of economic
development since the mid 90ies
• the protection of the environment.
To sum up, living conditions in East Germany have improved substantially since 1990.
Nevertheless, some shortcomings still occur …
Halle Institute
for Economic Research
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 11
East-Germany was not capable to catch up to West-Germany:
Shortcomings
0,0
20,0
40,0
60,0
80,0
100,0
120,0
%
Relative Productivity in East Germany (West Germany = 100%)Gross Domestic Product (Current Prices) per Employee
East Germany (including Berlin)
West Germany
IWHSource: Regional Accounts VGRdL 2011, calculation by IWH.
Why East Germany as a whole was not capable to catch up to West-Germany, although
transition has been finished?
Obviously, the effects of investment in physical capital are exhausted = capital investment
shows decreasing marginal effects
Halle Institute
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Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 12
Shortcomings
Lack of headquarters (Blum 2007)
0 20 40 60 80 100 120 140 160
Mecklenburg-Vorpommern
Thuringia
Saxony
Brandenburg
Saxony-Anhalt
Bremen
Saarland
Schleswig-Holstein
Rhineland-Palatinate
Berlin
Lower Saxony
Hamburg
Baden-Württemberg
Hesse
Bavaria
Northrhine-Westphalia
Number of enterprises
Locations of the 500 largest enterprises in Germany
Source: Deutschlands Große 500. DIE WELT-Rangliste der 500größten deutschen Unternehmen. G500 - 2010 - Onlinedatei Tabel, Calculation and illustration IWH.
IWH
Halle Institute
for Economic Research
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 13
Shortcomings
0
10
20
30
40
50
60
70
Production High-grade services Other services Not attributable
%
Functional Structure of the Manufacturung Sector in East Germany and West Germany, Share of Occupation Groups (total employment
in the manufacturing sector = 100%)
East Germany including Berlin
West Germany
Sources: Heimpold 2009, p. 431, calculated by using statistics of the Federal Employment Agency (as of 30/06/2008) and mainly based on a classification by Bade 1987, especially pp. 194-196.
IWH
Lack of headquarters (Blum 2007) → Above average specialisation in production
activities while high-grade and other services are under-represented
Halle Institute
for Economic Research
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 14
Shortcomings
Weak R&D activities in the business sector → Innovations will be seen as the most
important driver for long term growth
3,714,48
4,211,34
2,901,99
2,131,78
1,661,52
1,211,14
1,030,72
0,440,52
2,532,63
1,72
0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00 4,50 5,00
BerlinHessen
Baden-WürttembergHamburg
BayernNiedersachsen
SachsenRheinland-Pfalz
Nordrhein--WestfalenThüringen
BremenSchleswig-Holstein
Mecklenburg-Vorp.Brandenburg
Sachsen-AnhaltSaarland
DeutschlandWest Germany
East Germany including Berlin
%
Proportion of R&D expenditures (Turnover total = 100%) by German Laender, Mining and Manufacturing Sector, 2007
* R&D data explored by Stifterverband Wissenschaftsstatistik, including companieswith less than 20 employees, regional assignment according to thelocation of the R&D unit.** StBA, Fachserie 4, Reihe 4.1.1: "ProduzierendesGewerbe" (employment as of September 2007).
Source: Data: Kladobra et al., Wissenschaftsstatistik GmbH 2010, p. 32(and the sources mentioned there); diagram based on these data prepared by IWH.
IWH
Halle Institute
for Economic ResearchShortcomings
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 15
Potential regional
and interregional
production
networks in
Germany (2003)
Class Description
1
Regions with no
concentrated economic
activity
2 Regions with one
industrial cluster
3 Regions with more than
one industrial cluster
4
Regions with one
sectoral interdependency
of industrial clusters
5
Regions with more than one sectoral
interdependency of
industrial clusters
Potential regional networks Potential inter-regional networks
Sources: Statistical data of the Federal Employment Agency and StBA 2008, own calculation and illustration by IWH according to Titze et al. 2011.
Modern growth theory highlights the role of agglomeration economies for regional
development (for example Marshall 1920, Jacobs 1970, Porter 1990 and 1991).
Disrupted networks (Albach 1993), in the mid 90ies: lack of networking (DIW/IfW/IWH
1998, p. 27, Hornschild 1995, p. 25) = Absence of regional concentrated industrial
linkages → Inter-industry linkages promote the emergence of industrial clusters
Halle Institute
for Economic ResearchChallenges
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 16
• Fostering the emergence of industrial clusters
• Support of firms which are a key player in industrial clusters
• Emergence of firms which provide central functions = high-grade services
(R&D, controlling)
• Ensuring a stable economic growth with a shrinking and aging population - the
net migration rate from East to West Germany since 1989 has been in an
amount of about 2 Mio. people (Blum et al. 2010, p. 68).
Halle Institute
for Economic Research
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 17
Albach, H. (1993): Zerrissene Netze. Eine Netzwerkanalyse des ostdeutschen Transformationsprozesses. – Berlin.
ArcelorMittal Eisenhüttenstadt (2011): official website, http://www.arcelormittal-ehst.com/content/pages/home.php?lang=de,
download 11.05.2011.
Bade, F. J. (1987): Regionale Beschäftigtenentwicklung und produktionsorientierte Dienstleistungen. Deutsches Institut für
Wirtschaftsforschung (Hrsg.), Sonderheft 143/1987. Duncker & Humblot: Berlin, pp. 194-196 (in German).
Blum, U. (2007): Der Einfluß von Führungsfunktionen auf das Regionaleinkommen: eine ökonometrische Analyse deutscher
Regionen. In: IWH Wirtschaft im Wandel 6/2007, pp. 187-194 (in German).
Blum, U.; Buscher, H. S.; Gabrisch, H.; Günther, J.; Heimpold, G.; Lang, C.; Ludwig, U.; Rosenfeld, M. T. W.; Schneider, L. (2010):
Ostdeutschlands Transformation seit 1990 im Spiegel wirtschaftlicher und sozialer Indikatoren. 2. akt. u. verbess.
Aufl., Halle (Saale). http://www.iwh-halle.de/d/publik/sh/dkompendium.pdf (in German).
Blum, U.; Ragnitz, J.; Freye, S.; Scharfe, S.; Schneider, L. (2009): Regionalisierung öffentlicher Ausgaben und Einnahmen – Eine
Untersuchung am Besipeil der Neuen Länder -. IWH-Sonderheft 4/2009, Halle (Saale).
Boltho, A.; Carlin, W.; Scaramozzino, P. (1999): Will East Germany become a new Mezzogiorno? In: Adams, J. and Pigliaru, F.
(eds.): Economic growth and change. National and regional patterns of convergence and divergence. Edward
Elgar: Cheltenham (UK), Northampton (MA), pp. 323-348.
Deutscher Bundestag (1998): 13. Wahrperiode. Schlussbericht der Enquete-Kommission „Überwindung der Folgen der SED-
Diktatur im Prozess der Deutschen Einheit“, Drucksache 13/11000 (in German).
Deutschlands Große 500. DIE WELT-Rangliste der 500 größten deutschen Unternehmen. G500 - 2010 - Onlinedatei.
DIW Berlin, IfW (1991): Gesamtwirtschaftliche und unternehmerische Anpassungsprozesse in Ostdeutschland. Erster Bericht, in:
Kiel Discussion Papers 168, March (in German).
Literature
Halle Institute
for Economic Research
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 18
Literature
DIW/IfW/IWH (1998): Deutsches Institut für Wirtschaftsforschung Berlin; Institut für Weltwirtschaft an der Universität Kiel; Institut für
Wirtschaftsforschung Halle: Gesamtwirtschaftliche und unternehmerische Anpassungsfortschritte in
Ostdeutschland. Achtzehnter Bericht. IWH; Forschungsreihe 6/1998. Halle (Saale) 1998, S. 27.
Eisenhüttenstadt (2011): official website, www.eisenhuettenstadt.de, download 11.05.2011.
EKO Stahl GmbH [ed.] (2000): Einblicke – 50 Jahre EKO Stahl. 1. Auflage. Eisenhüttenstadt (in German).
Heimpold, G. (2009): Von der De-Industrialisierung zur Re-Industrialisierung: Sind Ostdeutschlands industrielle Strukturen
nachhaltig?, in: IWH Wirtschaft im Wandel 10/2009, pp. 425-434 (in German).
Hornschild, K. (1995): 3. Die Rolle der Politik beim Aufbau neuer Industriesstrukturen, in: Ministerium für Wirtschaft, Mittelstand und
Technologie, Referat Grundsatzfragen der Wirtschaftspolitik, Berichtswesen, Statistik (Hrsg.): Viertes
Industriesymposium Brandenburg (1995). Beiträge zur Bedeutung strategischer Allianzen im Land Brandenburg.
Eine Veranstaltung des Ministeriums für Wirtschaft, Mittelstand und Technologie Land Brandenburg und des
Deutschen Instituts für Wirtschaftsforschung Berlin, 14. Juni 1995, Cottbus. (= Schriftenreihe des MWMT – Band
VII), pp. 16-30 (in German).
Jacobs, J. (1970): The Economy of Cities, New York, Toronto.
Kladobra, A.; Grenzmann, C.; Kreuels, B., Wissenschaftsstatistik GmbH (2010): FuE-Datenreport 2010. Analysen und Vergleiche.
Forschung und Entwicklung in der Wirtschaft. Bericht über die FuE-Erhebungen 2007 | 2008. Unter Mitarbeit von
Ruth Hellmich, Herausgeber: Wissenschaftsstatistik GmbH im Stifterverband für die Deutsche Wissenschaft,
Essen, in:
http://www.stifterverband.org/publikationen_und_podcasts/wissenschaftsstatistik/fue_datenreport/fue_datenreport_
2010.pdf, accessed on 11/05/2011
Marshall, A. (1920): Principles of Ecomomics. An introductory volume, 4. Auflage 1952, New York.
Porter, M. E. (1990): The Competitive Advantage of Nations, London.
Porter, M. E. (1991): Nationale Wettbewerbsvorteile – Erfolgreich konkurrieren auf dem Weltmarkt, München (in German)
Halle Institute
for Economic ResearchLiterature
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 19
Regional Accounts VGRdL (2011): Arbeitskreis "Volkswirtschaftliche Gesamtrechnungen der Länder": Bruttoinlandsprodukt,
Bruttowertschöpfung in den Ländern und Ost-West-Großraumregionen Deutschlands 1991 bis 2010. Reihe 1,
Band 1. Erschienen im März 2011. Berechnungsstand des Statistischen Bundesamtes: August 2010/Februar 2011.
Stuttgart: Statistisches Landesamt Baden-Württemberg(im Auftrag der Herausgebergemeinschaft), in:
http://www.vgrdl.de/Arbeitskreis_VGR/tbls/R1B1.zip, accessed on 11/05/2011.
Sächsisches Staatsministerium für Wirtschaft und Arbeit (1993): Wirtschaft und Arbeit in Sachsen. Bericht zur wirtschaftlichen Lage
im Freistaat Sachsen, Dresden, März (in German).
Statistics of the Federal Employment Agency.
StBA, Fachserie 4, Reihe 4.1.1: "Produzierendes Gewerbe" (employment as of September 2007), cited in: Kladobra, A.; Grenzmann,
C.; Kreuels, B., Wissenschaftsstatistik GmbH (2010): FuE-Datenreport 2010. Analysen und Vergleiche. Forschung
und Entwicklung in der Wirtschaft. Bericht über die FuE-Erhebungen 2007 | 2008. Unter Mitarbeit von Ruth
Hellmich, Herausgeber: Wissenschaftsstatistik GmbH im Stifterverband für die Deutsche Wissenschaft, Essen, p.
32, in:
http://www.stifterverband.org/publikationen_und_podcasts/wissenschaftsstatistik/fue_datenreport/fue_datenreport_
2010.pdf, accessed on 11/05/2011.
StBA, Fachserie 18, Reihe 2 (2008): Volkswirtschaftliche Gesamtrechnungen. Input-Output-Rechnung. Erschienen am 20. April
2007, korrigiert am 7. Mai 2008.
Titze, M; Brachert, M.; Kubis, A. (2011): The Identification of Regional Industrial Clusters Using Qualitative Input-Output Analysis
(QIOA), in: Regional Studies, Vol. 45 (1), pp. 89-102.
Halle Institute
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Backup slides
Halle Institute
for Economic ResearchIntroduction
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 21
Production
of hot metal
Ore (S, BR,
RUS, …)
Coke (PL, …)
Lime (PL, …)
Production
of steel
Blast furnace
= built in the 50ies,
modernized in the
90ies
Converter
= built in the early
80ies
Production
of hot-rolled
strips
Hot strip mill
= built in the mid
90ies
Production
of cold-rolled
strips
Cold strip mill
= built in the 60ies
Vehicles„
manufacturers
Machineries„
manufacturers
…
The technological process of an integrated metallurgical plant
Source: Own illustration.
Halle Institute
for Economic Research
Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 22
Introduction
31
12
1211
10
24
Sub-branches' share on the East German manufacturing sector (in %) in 1990
Machinery and vehicles
Chemicals
Food products
Energy and fuels
Electrical machinary and apparatusOther*
* Light industry, Metals, Construction, Textiles, Water
Source: DIW Berlin, IfW (1991): Gesamtwirtschaftliche und unternehmerische Anpassungsprozesse in Ostdeutschland. Erster Bericht, in: Kiel Discussion Papers 168, March, p. 4 (Primary Sources: Statistical Office of the GDR and Federal Statistical Office, FRG).
Halle Institute
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Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 23
Shortcomings
9,708,12
7,116,93
5,944,85
4,444,14
3,563,213,21
2,762,202,15
1,711,27
5,255,43
3,99
0,00 2,00 4,00 6,00 8,00 10,00 12,00
BerlinHessen
Baden-WürttembergHamburg
BayernNiedersachsen
SachsenRheinland-Pfalz
Nordrhein-WestfalenThüringen
BremenSchleswig-Holstein
Mecklenburg-Vorp.Brandenburg
Sachsen-AnhaltSaarlandGermany
West GermanyEast Germany (including Berlin)
%
Proportion of R&D staff* (number of employees** total = 100%) by German Laender, Mining and Manufacturing Sector, 2007
Source: Data: Kladobra et al., Wissenschaftsstatistik GmbH 2010, p. 32(and the sources mentioned there); diagram based on these data prepared by IWH.
IWH
* R&D data explored by Stifterverband Wissenschaftsstatistik, including companieswith less than 20 employees, regional assignment according to thelocation of the R&D unit.** StBA, Fachserie 4, Reihe 4.1.1: "ProduzierendesGewerbe" (employment as of September 2007)
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Mirko Titze: East Germany‟s Economy on the Path from Transition to European Integration 24
Shortcomings
Modern growth theory highlights the role of agglomeration economies for regional
development (for example Marshall 1920, Jacobs 1970, Porter 1990 and 1991).
The character of potential production networks – the example of Nuremberg (2003)
63
26.1
31
66
31
Nuremberg (city)
Fuerth (city)
Schwabach
Roth
Erlangen-Hoechstadt
Potential ntermediate input flow
Erlangen
Fuerth (district)
Nuremberg (district)
24.4
40.1, 40.3
27.4
19
27.522.2, 22.3
32
CPA Bezeichnung
19 Tanning and dressing of leather
22.2 - 22.3 Printing
24.4 Pharmaceuticals
26.1 Glass and glass products
27.4 Basic precious
27.5 Casting of metals
31 Electrical machinery
32 Communication equipment and
40.1, 40.3 Electricity and Steam supply
62 Air transport
63 Supporting transport activities
66 Insurance and pension funding
Legend
62
Notation
Source: Own calculation and illustration.Potential intermediate input flow