East German productivity and the transition to the market economy: comparisons with West Germany and Northern Ireland

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This book describes the first application to a former communist bloc economy of the technique of detailed matched plant comparisons. It is of special note that the factory visits to East German plants occurred close to the start of the German monetary and economic union. As such, the authors have been able to elucidate both the performance of firms under the previous planning system and the beginnings of the transition to the market economy. Careful benchmark measures of the level of productivity in east German plants compared to counterparts in West Germany are provided (in June 1990 and June 1991). Rates of growth of output per head are indicated and sources of previous and likely future improvements reviewed. The competitive strengths and weaknesses of the firms are discussed. Attention is also given to such factors as product standards, the impact of environmental regulation, switches from Eastern European to Western markets and the suitability of premises. Firms which are judged as likely to survive the transition to the market economy are identified and further examined. The explanations of the East German firms' comparatively low level of productivity are considered; particularly the role of physical and human capital. Various aspects of the machine stock are described; e.g. comparative age, level of technology, country of origin, balance, appropriateness, viability (given various levels of labour costs) and ease of maintenance. The number and quality of skilled persons at various levels of hierarchy are measured. The strategies adopted to supplement East German skills with West German know-how are described. Implications for industrial and regional policy in Germany are drawn. There is also an attempt to apply lessons to other low productivity economies in Eastern Europe and in the EC (particular attention is given in this respect to the case of Northern Ireland).

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Methods and descriptions of the sample
Comparative company performance
Prospects for the future

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