productivity in western and eastern germany after the...
TRANSCRIPT
Productivity in Western and Eastern Germany after the
Unification: What can we learn?
Yasushi NAKAMURA Yokohama National University
at ERI, Hitotsubashi University
28 February 2015
1
Motivation
Motivation Differences
Labor and Capital Productivity gap
Outlook
•25 years after the reunification, there is still distinct differences in the patterns of economic development in the western and eastern Germany.
• In particular, the productivity differs in the two regions. • It is enigmatic why the difference still exists, because: the same culture and language, law, institutions, and
other non-physical infrastructure, the almost same conditions of physical infrastructure, the better human capital in Eastern Germany, if formally
measure it, the same or better per worker capital stock in the
production sector of Eastern Germany, most old managers were replaced with new managers.
Motivation
2
Differences between WG and EG
Motivation Differences
Labor and Capital Productivity gap
Outlook
Income Unemployment Demographics Farm size Child care
3
Differences between WG and EG
Motivation Differences
Labor and Capital Productivity gap
Outlook
Income Unemployment Demographics Farm size Child care
4
Differences between WG and EG
Motivation Differences
Labor and Capital Productivity gap
Outlook
Income Unemployment Demographics Farm size Child care
5
Differences between WG and EG
Motivation Differences
Labor and Capital Productivity gap
Outlook
Income Unemployment Demographics Farm size Child care
6
Differences between WG and EG
Motivation Differences
Labor and Capital Productivity gap
Outlook
Income Unemployment Demographics Farm size Child care
7
Purpose: Let’s look at it more in detail!
Motivation Differences
Labor and Capital Productivity gap
Outlook
• I do not have any definite explanation for the productivity gap yet.
• If it is indeed difficult to find the causes, then it would suggest we need to be more carful about the determinants of productivity: per worker capital stock and formally counted education years can not sufficiently account for the productivity level.
Purpose Human capital Labor productivity Capital Capital productivity
8
Purpose: Fact?
Motivation Differences
Labor and Capital Productivity gap
Outlook
•Take a look at labor. •Take a look at capital stock. •Calculate the hypothetical productivity gaps.
Purpose Human capital Labor productivity Capital Capital productivity
9
Human capital formally measured
Motivation Differences
Labor and Capital Productivity gap
Outlook
0
5
10
15
20
25
30
35
EG WG EG WG
1991 1991 2002 2002
% of the total population of age 25-65 at the year of 2002
High skill Low skill
Purpose Human capital Labor productivity Capital Capital productivity
Ragnitz(2007)
10
Labor productivity (Overall)
Motivation Differences
Labor and Capital Productivity gap
Outlook
0102030405060708090100
0
10000
20000
30000
40000
50000
60000
70000
80000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Value added per worker 2005 Euro(Left), % Ratio(Bar, Right)
EG/WG WGwoB EGoB
Purpose Human capital Labor productivity Capital Capital productivity
Data: SBA 11
Labor productivity (Production exc. services)
Motivation Differences
Labor and Capital Productivity gap
Outlook
0102030405060708090100
0
20000
40000
60000
80000
100000
120000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Value added per worker 2005 Euro(Left), % Ratio(Bar, Right)
EG/WG WGwoB EGoBData: SBA
Purpose Human capital Labor productivity Capital Capital productivity
12
Labor productivity (Services)
Motivation Differences
Labor and Capital Productivity gap
Outlook
0102030405060708090100
0
10000
20000
30000
40000
50000
60000
70000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Value added per worker 2005 Euro(Left), % Ratio(Bar, Right)
EG/WG WGwoB EGoB
Purpose Human capital Labor productivity Capital Capital productivity
Data: SBA 13
Capital stock (Overall)
Motivation Differences
Labor and Capital Productivity gap
Outlook
0102030405060708090100
0
10000
20000
30000
40000
50000
60000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Capital Stock per worker 2005 Euro(Left), % Ratio(Bar, Right)
EG/WG WGwoB EGoB
Purpose Human capital Labor productivity Capital Capital productivity
Repurchase prices, excluding buildings and infrastructure) Data: SBA 14
Capital stock (Production exc. services)
Motivation Differences
Labor and Capital Productivity gap
Outlook
0
20
40
60
80
100
0100002000030000400005000060000700008000090000
100000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Capital Stock per worker 2005 Euro(Left), % Ratio(Bar, Right)
EG/WG WGwoB EGoB
Purpose Human capital Labor productivity Capital Capital productivity
Repurchase prices, excluding buildings and infrastructure) Data: SBA 15
Capital stock (Services)
Motivation Differences
Labor and Capital Productivity gap
Outlook
0102030405060708090100
05000
100001500020000250003000035000400004500050000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Capital Stock per worker 2005 Euro(Left), % Ratio(Bar, Right)
EG/WG WGwoB EGoB
Purpose Human capital Labor productivity Capital Capital productivity
Repurchase prices, excluding buildings and infrastructure) Data: SBA 16
Capital productivity (Overall)
Motivation Differences
Labor and Capital Productivity gap
Outlook
0
20
40
60
80
100
120
140
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Capital productivity 2005 Euro(Left), % Ratio(Bar, Right)
EG/WG WGwoB EGoB
Purpose Human capital Labor productivity Capital Capital productivity
Data: SBA 17
Capital productivity (Production exc. services)
Motivation Differences
Labor and Capital Productivity gap
Outlook
0102030405060708090100
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Capital productivity 2005 Euro(Left), % Ratio(Bar, Right)
EG/WG WGwoB EGoB
Purpose Human capital Labor productivity Capital Capital productivity
Data: SBA 18
Capital productivity (Services)
Motivation Differences
Labor and Capital Productivity gap
Outlook
0
20
40
60
80
100
120
140
160
180
0
0.5
1
1.5
2
2.5
3
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Capital productivity 2005 Euro(Left), % Ratio(Bar, Right)
EG/WG WGwoB EGoB
Purpose Human capital Labor productivity Capital Capital productivity
Data: SBA 19
Productivity gap : method
Motivation Differences
Labor and Capital Productivity gap
Outlook
• Method: Growth accounting based on normalized CES production function
• Y, K, L and G are indexed to the base period. • The share parameter π0 for WG from 2005 all German IOT, π0 for EG
from 2005 Regional Accounting data of the federal state, Sachsen-Anhalt.
• Approximate GKt with Yt/Kt and GL
t with Yt/Lt. • Calculate hypothetical Yt-hat, replacing G*
t for EG with G*t for WG.
• The difference between Yt and Yt-hat indicates the difference in the TFPs of WG and EG.
Method Result Some observations
( ) ( )( )1
0 0 01
1 11
s s st tt t K t LY Y K G L G
s ors
π π
σ σσ
= + − −
= =−
20
Productivity gap (WG=1, σ=1 and 0.5)
Motivation Differences
Labor and Capital Productivity gap
Outlook
0.8
1
1.2
1.4
1.6
1.8
2
2.2
2.4
2.6
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
All PD SVAll(0.5) PD(0.5) SV(0.5)
Method Result Some observations
21
Some observations on the productivity gap
Motivation Differences
Labor and Capital Productivity gap
Outlook
•The gap decreased rapidly until the middle of the 1990s. •The catching-up slowed in the last-half of the 1990s
because the EG productivity in services did not improved. The EG productivity in production continued to improved, very slowly though.
•The catching-up was slightly accelerated in the first half of the 2000s, because the EG productivity was slightly improving both in production and services.
•The tendency was reversed after the Lehman Shock. •Nevertheless, the gap was not significantly closed in the
2000s. There has been a gap the size of which was in the range from 20 to 40% of the WG level.
Method Result Some observations
22
Again, the enigma.
Motivation Differences
Labor and Capital Productivity gap
Outlook
•Some explanations exist. •The EG production structure was biased in favor of the low-
value added sectors. Thus, under-usage of human capital occurs. However, why the bias exists? Old- and new-historical factors? People move faster than business entities?
•Maybe the gap is within normal variations of regional productivity differences in other countries. Old- and new-historical and geographical factors? The high-productivity big companies think global. Still, the question remains. Why is it uniformly low in EG?
Enigma, again Outlook
23
Outlook
Motivation Differences
Labor and Capital Productivity gap
Outlook
• It is not easy to clearly explain why the productivity gap still exist between WG and EG.
•This suggests that we are not very successful to understand the determinants of productivity.
Enigma, again Outlook
24