Tag Archives: industry structure

Working Paper #04.19 now available

By Anne Margarian and Christian Hundt.

The Working Paper #04.19 “Location, industry structure and (the lack of) locally specific knowledge: On the diverging development of rural areas in Germany’s East and West” is now online and available here  for reading and downloading. An overview of all Working Papers yet published in this blog is provided via the button “Working Papers” in the menu above.

Abstract

Some rural regions in Western Germany have experienced a very positive economic development in terms of employment and incomes in the past decade. This development, however, is in sharp contrast to the the enduring economic lag of many rural regions in Eastern Germany. This paper seeks to find out, to what extent these differences in employment development can be explained by sectoral patterns and region-specific capacities and capabilities.

We employ an extended shift-share regression model that explains the employment development in German districts between 2007 and 2016. The model differentiates between Western and Eastern German regions as well as between urban and rural regions by means of spatial location effects. This specification helps us to capture both: the historically evolved differences inherent in the socialist and capitalist past of Eastern and Western Germany and the varying economic environments in urban and rural areas. The extended shift-share regression confirms that simple industry effects, i.e. linear effects of industry shares, only explain a small part of the differences in employment development between rural regions. Most deviations are instead captured in the competitive share effects (CSE) that represents how employment development in a region systematically deviates from the average development of its industries at national level.

Further analyses of the CSE reveal that the manufacturing sector, despite its general loss in employment shares, is of crucial importance for rural prosperity. In this regard, the apparent disadvantage of rural districts in Germany’s East can be explained by a lack of locally specific, complementary immobile production capacities and capabilities for manufacturing. These locally specific skills develop endogenously. Urban districts in the East, in contrast, do not have to rely on endogenous factors alone but may overcome their historical disadvantage if they manage to exploit their agglomeration advantages in order to attract knowledge intensive industries and highskilled workers.

Working Paper #01.17 now available

By Franziska Pudelko and Christian Hundt.

The Working Paper #01.17 “Gauging two sides of regional economic resilience in Western Germany – Why resistance and recovery should not be lumped together” is now online and available here  for reading and downloading. An overview of all Working Papers yet published in this blog is provided via the button “Working Papers” in the menu above.

Abstract

The paper empirically investigates the economic resilience of Western German regions in the wake of the Great Recession of 2008/2009. In particular, the focus is laid on the influence of regional agglomeration economies (arising from specialization, related and unrelated variety) and the explicit subdivision of short-term resilience into resistance and recovery. The necessity to distinguish between different factors and phases is well documented by means of the OLS regression results as all three types of agglomeration economies reveal varying, if not opposing directions of influences across the resistance and recovery phase. A pregnant example refers to regional specialization. Not only does it show a negative impact on resistance while exerting a positive influence during the recovery phase, but it is also mediated by the regional share in manufacturing workforce. This workforce reveals opposing phase-specific effects itself. Hence, ignoring the two-component structure of short-term resilience entails the risk of imprecise, if not false conclusions on the driving mechanisms stabilizing and/or destabilizing regional economies in times of crisis.