Extended abstract of a paper designated to be presented at the XII HSE International
Academic Conference on Economic and Social Development on April 5-7, 2011, Moscow
Speakers name:
Dr Heimpold, Gerhard
Place of work:
Halle Institute for Economic Research (IWH)
Position:
Senior Economist
Contact Address:
Kleine Maerkerstrasse 8
D-06108 Halle (Saale)
Germany
Phone:
++49 345 7753 753
Fax:
++49 345 7753 779
E-mail:
Gerhard.Heimpold@iwh-halle.de
Title of the proposed paper: The manufacturing sector in East German regions 20 years after
German Unification – how sustainable is its economic structure?
The issue of the paper is the structural performance of the manufacturing sector in East
Germany’s regions. When the central planning system in the eastern part of Germany
collapsed at the end of the 1980ies, its manufacturing sector underwent a sharp deindustrialization process in the early 1990ies characterized by a decline in production and
employment. While production decline came to an end in 1993, employment continued to
decrease until 2005. During the period 2006-2008, the manufacturing sector experienced a
growth in employment. Against this background, hopes have emerged, that East Germany’s
manufacturing sector is capable of shifting successfully from de-industrialization to reindustrialization. The paper comprises an investigation whether the economic structures
which have arisen so far show signs of sustainability in economic terms. The larger the
proportion of technology-driven industries and high-grade services are instead of pure
production activities the greater could be the potential for sustainable growth on international
markets.
The research presented concerns the regional level, since economic strengths and weaknesses
of the manufacturing sector are unevenly distributed among East German regions. For
analytical purposes, the Spatial Planning regions are used as regional units, which typically
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comprise two or more administrative districts which allows – by and large – considering
functional relationship between small-scale sub-regions.
The research represents an empirical type of work. Its information base primarily consists of
employment data provided by the Federal Employment Agency. This information base allows
sectoral, functional (occupational) and regional disaggregation of employment data. Based on
these data an analysis of structural patterns within the manufacturing sector is presented.
Firstly, industry structure is analyzed by factor intensity, based on a typology used in the
international literature on sectoral competitiveness (cf. Peneder 1999). Secondly, occupational
data are explored in combination with a typology familiar to regional analyses (cf. Bade 1987)
in order to get findings on the functional structure of the manufacturing sector (production
function versus high-grade services and other services).
As main results, the contribution reveals a number of structural shortcomings. The great
majority of East German regions show a specialization in labor intensive manufacturing
industries while the specialization in technology-driven industries is a rare case. In addition,
the analysis shows a dominance of production activities whereas high-grade-service activities
are under-represented in comparison to the West German manufacturing sector. The analysis
indicates that East Germany’s manufacturing sector until now shows signs of a branch-plant
economy, whereas headquarters are rare.
The interim conclusions that can be drawn from the analysis concern the need for further
structural change which primarily forms a challenge for the manufacturing sector itself. The
lack of high-grade service activities, especially of R&D capacities, in numerous
manufacturing enterprises requires strengthening the links to public research institutions
which are well developed in East Germany. Moreover, strengthening technology-driven
activities in the manufacturing sector requires a highly-qualified personnel. Maintaining the
adequate human capital forms one of the greatest challenges for firms and policy due to East
Germany’s demographic situation which is characterized by a shrinking and ageing
population.
References:
Bade, F.-J. (1987): Regionale Beschäftigtenentwicklung und produktionsorientierte
Dienstleistungen. Deutsches Institut für Wirtschaftsforschung (Hrsg.). – Berlin 1987.
= Sonderheft 143/1987.
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Peneder, M. (1999): Intangible Investment and Human Resources. The New WIFO
Taxonomy of Manufacturing Industries. – Vienna. (= WIFO Working Papers No.
114), http://www.wifo.ac.at/wwa/servlet/wwa.upload.Download
Servlet/bdoc/WP114.PDF, accessed on 13/10/2009.
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