Abstract
Germany is one of the most important exporters of manufacturing goods in the world, but by far not all manufacturing firms in Germany are exporters, and there is a remarkable gap between the share of exporters in all manufacturing firms between West Germany and East Germany. While in West Germany in 2004 about two in three manufacturing plants were exporters, fourteen years after re-unification this share was less than fifty percent in the former communist East Germany. Given that exports play a key role in shaping business cycles and growth in Germany, and the much higher unemployment in East compared to West Germany, promotion of exports by East German firms figure prominently on the policy agenda. However, the reasons for the large difference in the propensity to export between East and West German firms are not yet well understood, not least due to a lack of comprehensive micro data. Using unique new data and a recently introduced non-linear decomposition technique this paper shows that the huge difference in the propensity to export between West and East German plants can only partly be explained by differences in firm size, productivity, and technology intensity.
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Notes
In this paper the term firm is used to mean a local production unit, or plant.
The earlier version of this paper (Wagner 2007a) used wages per employee to proxy human capital as a determinant of exporting. While wages can be expected to be positively correlated with human capital, including wages per employee in a study with a focus on differences between export activities of East and West German firms does not make sense because East German firms are known to use a low wage strategy to establish their competitiveness. Differences in wages per employee between East and West German firms, therefore, do not reflect differences in human capital (alone), but also differences in the rates of return to human capital between East und West Germany. I am grateful to two anonymous referees to point this out.
Stata 9.2 and the program fairlie.ado were used for computations.
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Acknowledgement
All computations were done inside the Research Data Centre of the Statistical Office of Berlin. Comments from three anonymous referees that lead to a thorough revision of an earlier version (Wagner 2007a) are gratefully acknowledged.
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Wagner, J. A note on why more West than East German firms export. Int Econ Econ Policy 5, 363–370 (2008). https://doi.org/10.1007/s10368-008-0119-7
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DOI: https://doi.org/10.1007/s10368-008-0119-7