Abstract
The idea of this paper is to apply modern portfolio theory to the gross value added shares of different economic activities in order to determine whether or not industry portfolios are efficient. Using the national accounts (Volkswirtschaftliche Gesamtrechnung) of Germany’s federal states for 2011, I run numerical simulations of their gross value added shares to determine the set of “efficient mean-variance combinations” (Markowitz, J Financ 7:77–91, 1952) of economic activities for each German federal state. The paper finds that their 2011 industry portfolios are in fact not efficient, and that rearranging the shares of economic activities increase total gross value added and decrease its risk. According to the numerical results, German federal states—at least Western Germany—could move from industrial to knowledge-based trading and service economies. The results are robust for different sample periods of Germany’s national accounts and the underlying assumptions of the numerical simulations are confirmed by using a sample of EU countries.
Zusammnfassung
Der Artikel überträgt die moderne Portfoliotheorie auf die Bruttowertschöpfung der Wirtschaftszweige in den Ländern der Bundesrepublik Deutschland und deren Branchenstrukturen. Anhand der Daten der volkswirtschaftlichen Gesamtrechnung (VGR) werden zunächst die „effizienten Mittelwert-Varianz Kombinationen“ nach Markowitz (1952) berechnet, um anschließend die Effizienz der Branchenstrukturen von 2011 in den deutschen Bundesländern zu untersuchen. Die numerischen Simulationen zeigen, dass deren Branchenstrukturen nicht effizient sind und eine Umstrukturierung der Anteile der Wirtschaftszweige an der Bruttowertschöpfung zu mehr regionalem Wachstum und Stabilität führt. Dies könnte durch einen Übergang von Industriegesellschaften zu wissensbasierten Handels- und Dienstleistungsgesellschaften in allen Bundesländern – insbesondere in den westdeutschen Flächenländern – erfolgen. Die Ergebnisse sind robust für unterschiedliche Zeiträume der VGR. Eine Stichprobe von EU-Ländern bestätigt darüber hinaus die zugrunde liegenden Annahmen der numerischen Simulationen.
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Notes
Using real GDP data from Eurostat (2014), annual real growth rates for the EU-28 countries decreased from 3.1 % in 2007 to − 4.4 % in 2009 and after recovering to 1.7 % in 2011 fell again to 0.3 % in 2013.
According to the nomenclature of units for territorial statistics (NUTS) by the EU, German federal states are at the NUTS-1 level.
Technically, I calculate the efficient frontier for each combination (out of five economic activities; starting with a weight of 100 % for one sector) by 1 percentage point steps and record their risk-return characteristics. I then eliminate those with an unfavorable risk for each return (out of the predetermined return range of 0–10 %; starting with a return of 0 %) by 0.01 percentage point steps. Numerical simulations are carried out by the use of the GAUSS matrix programming: http://www.aptech.com/products/gauss-mathematical-and-statistical-system/.
Table 3 in the appendix gives an overview of the VGR nomenclature of economic activities and their abbreviations.
Since the sector “agriculture” contributes only a small proportion of Germany’s gross value added and its shares cannot be altered (or at least increased) significantly, I omit the sector and set its shares to zero. Thus, industry portfolios of the federal states on the efficient frontier are characterized by a maximum of five out of six sectors (n = 5).
Testing of the null hypothesis of “homogeneity of variances” using two 10-year interval for the period 1990–2009 lead to almost the same results.
Table 10 in the appendix shows in addition the average gross value added change for three 5-year intervals and the entire 1996–2010 period.
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This paper has benefited greatly from the comments of Jörn Kleinert and three anonymous referees. I am grateful to Uwe Behringer for his efforts on a previous version. I am, of course, responsible for any errors.
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Hafner, K.A. Regional industrial diversification: evidence from German gross value added. Rev Reg Res 36, 169–193 (2016). https://doi.org/10.1007/s10037-016-0105-4
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DOI: https://doi.org/10.1007/s10037-016-0105-4