Centre for Evidence-based Policy Advice
Centre for Evidence-based Policy Advice (IWH-CEP) The Centre for Evidence-based Policy Advice (IWH-CEP) of the IWH was founded in 2014. It is a platform that bundles and…
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Department Profiles
Research Profiles of the IWH Departments All doctoral students are allocated to one of the four research departments (Financial Markets – Laws, Regulations and Factor Markets –…
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Loose (Interview)
When there were almost no flats in Halle yet ... Brigitte Loose about IWH's foundation and development Ms Loose, how did you experience the early days of IWH? Looking back, it was…
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IWH Doctoral Programme in Economics
Why Doctoral Studies at IWH? The IWH Doctoral Programme in Economics – one of the Top 20 places to do a PhD ( INOMICS Career Guide 2023 ) The Halle Institute for Economic Research…
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Department Profiles
Research Profiles of the IWH Departments All doctoral students are allocated to one of the four research departments (Financial Markets – Laws, Regulations and Factor Markets –…
See page
The East-West German Gap in Revenue Productivity: Just a Tale of Output Prices?
Matthias Mertens, Steffen Müller
Abstract
East German manufacturers’ revenue productivity (value-added per worker) is some 8 (25) percent below West German levels, even three decades after German unification. Using firm-product-level data containing information on product quantities and prices, we analyse the role of product specialisation and reject the prominent ‚extended work bench hypothesis‘, stating a specialisation of Eastern firms in the intermediate input production as explanation for these sustained productivity differences. We decompose the East’s revenue productivity disadvantage into Eastern firms selling at lower prices and producing more physical output for given amounts of inputs within ten-digit product industries. This suggests that Eastern firms specialise vertically in simpler product varieties generating less consumer value but being manufactured with less or cheaper inputs. Vertical specialisation, however, does not explain the productivity gap as Eastern firms are physically less productive for given product prices, implying a genuine physical productivity disadvantage of Eastern compared to Western firms
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The East-West German Gap in Revenue Productivity: Just a Tale of Output Prices?
Matthias Mertens, Steffen Müller
Abstract
East German manufacturers’ revenue productivity (value-added per worker) is some 8 (25) percent below West German levels, even three decades after German unification. Using firm-product-level data containing information on product quantities and prices, we analyse the role of product specialisation and reject the prominent ‚extended work bench hypothesis‘, stating a specialisation of Eastern firms in the intermediate input production as explanation for these sustained productivity differences. We decompose the East’s revenue productivity disadvantage into Eastern firms selling at lower prices and producing more physical output for given amounts of inputs within ten-digit product industries. This suggests that Eastern firms specialise vertically in simpler product varieties generating less consumer value but being manufactured with less or cheaper inputs. Vertical specialisation, however, does not explain the productivity gap as Eastern firms are physically less productive for given product prices, implying a genuine physical productivity disadvantage of Eastern compared to Western firms.
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Transmitting Fiscal Covid-19 Counterstrikes Effectively: Mind the Banks!
Reint E. Gropp, Michael Koetter, William McShane
IWH Online,
No. 2,
2020
Abstract
The German government launched an unprecedented range of support programmes to mitigate the economic fallout from the Covid-19 pandemic for employees, self-employed, and firms. Fiscal transfers and guarantees amount to approximately €1.2 billion by now and are supplemented by similarly impressive measures taken at the European level. We argue in this note that the pandemic poses, however, also important challenges to financial stability in general and bank resilience in particular. A stable banking system is, in turn, crucial to ensure that support measures are transmitted to the real economy and that credit markets function seamlessly. Our analysis shows that banks are exposed rather differently to deteriorated business outlooks due to marked differences in their lending specialisation to different economic sectors. Moreover, a number of the banks that were hit hardest by bleak growth prospects of their borrowers were already relatively thinly capitalised at the outset of the pandemic. This coincidence can impair the ability and willingness of selected banks to continue lending to their mostly small and medium sized entrepreneurial customers. Therefore, ensuring financial stability is an important pre-requisite to also ensure the effectiveness of fiscal support measures. We estimate that contracting business prospects during the first quarter of 2020 could lead to an additional volume of non-performing loans (NPL) among the 40 most stressed banks ‒ mostly small, regional relationship lenders ‒ on the order of around €200 million. Given an initial stock of NPL of €650 million, this estimate thus suggests a potential level of NPL at year-end of €1.45 billion for this fairly small group of banks already. We further show that 17 regional banking markets are particularly exposed to an undesirable coincidence of starkly deteriorating borrower prospects and weakly capitalised local banks. Since these regions are home to around 6.8% of total employment in Germany, we argue that ensuring financial stability in the form of healthy bank balance sheets should be an important element of the policy strategy to contain the adverse real economic effects of the pandemic.
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Determinants of Foreign Technological Activity in German Regions – A Count Model Analysis of Transnational Patents
Eva Dettmann, Iciar Dominguez Lacasa, Jutta Günther, Björn Jindra
Foresight-Russia,
No. 1,
2014
Abstract
Most research on R&D internationalisation focuses on comparative analysis of location factors at the national level of analysis. Very little work, however, has taken place in this field for the sub-national regional location behavior of multi-national enterprises (MNE). The paper contributes to the existing research by providing evidence on the determinants of foreign technological activities at the sub-national level for Germany, which hosts the largest share of foreign R&D within the EU27 and features the highest cross-regional dispersion of patented research. Using a pooled count data model, we estimate the effect of various sources for externalities on the extent of foreign technological activity across regions. Particular attention is paid to the role of local knowledge spillovers, technological specialization and diversification. We differentiate foreign and domestic sources of specialisation and account for region and sector-specific influences. This is the first time that the ‘cross-border-ownership’ principle to measure R&D internationalisation is combined with regionalised patent information.
To verify our findings we develop hypotheses. In particular, we expect and find that foreign technological activity is attracted by technologically specialised sectors of regions. In contrast to current empirical work, this effect applies both to foreign as well as domestic sources of specialization, although effects on foreign specialization seem more significant. We expect and find the same for science-industry spillovers. We postulate a negative impact of domestic specialization on foreign technological activities and a strong positive effect from diversificationspillovers, by comparison with specialisation spillovers, but these hypotheses are rejected. We find that the direction of the specialisation effect depends on dominance in the position of domestic firms as well as on the balance of knowledge flows between them and foreign actors.
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Determinants of Foreign Technological Activity in German Regions – A Count Model Analysis of Transnational Patents (1996-2009)
Eva Dettmann, Iciar Dominguez Lacasa, Jutta Günther, Björn Jindra
Abstract
This paper analyses the determinants of spatial distribution of foreign technological activity across 96 German regions (1996-2009). We identify foreign inventive activity by applying the ‘cross-border-ownership concept’ to transnational patent applications. The descriptive analysis shows that foreign technological activity more than doubled during the observation period with persistent spatial heterogeneity in Germany. Using a pooled count data model, we estimate the effect of various sources for externalities on the extent of foreign technological activity across regions. Our results show that foreign technological activity is attracted by technologically specialised sectors of regions. In contrast to existing findings this effect applies both to foreign as well as domestic sources of specialisation. We show that the relation between specialisation and foreign technological activity is non-linear and that it is influenced by sectoral heterogeneity. Externalities related to technological diversification attract foreign R&D only into ‘higher order’ regions.
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