East German Productivity and the Transition to the Market Economy : Comparisons with West Germany and Northern Ireland

This study describes the first application to a former communist economic bloc economy of the technique of detailed matched plant comparisons.

It is of note that the factory visits to East German plants occurred close to the start of German monetary and economic union, allowing the authors to elucidate both the performance of firms under the previous planning system and the beginnings of the transition to the market economy.

It provides benchmark measures of the level of productivity in East German plants compared to counterparts in West Germany (in June 1990 and July 1991).

Rates of growth of output per head are indicated, and sources of previous and likely improvements are reviewed.

The competitive strengths and weakness of firms are discussed, and attention is given to factors such as product standards, the impact of environmental regulation, switches from eastern Europe to western markets and the suitability of premises.

Firms which are judged as likely to survive are identified and further examined.

The explanations of East German firms' comparatively low level of productivity are considered, in particular, the role of physical and human capital.