Information of the Institut der deutschen Wirtschaft Köln

Structural Convergence of the East German Economy

Despite Successes The Job Is Not Done 20 years after the fall of the Berlin wall East Germany has caught up with the west in some aspects while still lagging in others. Its GDP per capita remains stuck at two thirds of the West German level and its unemployment rate is twice the West German rate. Among the positive developments are the continuous, substantial growth of the manufacturing sector and the generation of significant industrial clusters in different regions. Overall the structural progress of East Germany’s economy during the past decade is quite remarkable. The share of transfer-driven sectors like public and private services is shrinking, while the manufacturing sector is growing strongly. In particular in the southern East German states – Saxony, Saxo-ny-Anhalt and Thuringia – manufacturing has expanded rapidly and new industrial clusters have emerged. With the continuing convergence of the economic structure it becomes more and more likely, that East Germany will have developed a viable economy when the federal “solidarity pact” transfers expires in 2019.

More information: Klaus-Heiner Röhl · Phone +49 30 27877-103 · roehl@iwkoeln.de DOI: 10.2373/1864-810X.09-01-05

International Comparison of Strike Statistics

Statistical Bias Suggests Retreating Strike ActivitiesInternational comparisons of labor disputes present Germany as a country with comparatively restrained strike activity. The annual average for wor-king days per employee lost due to strikes and lockouts was five days in the years 2000 to 2007. Among 20 OECD member countries only Japan, Poland and Switzerland reported fewer days. However, strike activities have declined in most countries and the differences between countries have become smaller. While this was due to a shrinking number of strikes and lockouts in the majority of the countries, it was a result of shorter strikes in Germany. A comparison of the sources and methods on which the numbers are based shows that Germany is among the small group of countries with sketchy statistics. One reason are constraints on data coll-ection, another that only strikes and lockouts reported by employers are included – not those reported by the unions which regularly outnumber the former. As a consequence the official statistics sizably underestimate the actual scope of strike activity in Germany.

More information: Hagen Lesch · Phone +49 221 4981-778 · lesch@iwkoeln.de DOI: 10.2373/1864-810X.09-01-06

No. 2, 2009

Industry by Region

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East Germany: without BerlinSource: German national accounts

share of manufacturing in total value added, in percent

1991 1995 2000 2005

10

15

20

25

2008

West Germany

BerlinEast Germany29.0

18.6

14.2

24.5

19.6

12.6

Strike-tested Canadians

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France, Japan: 2000 – 2006Sources: ILO; OECD

working days per employee lost due to strikesand lockouts, average 2000 – 2007

Canada 207151

France 66110

Italy 7638

US 1135

UK 2634

Sweden 826

Australia 11815

Netherlands 255

Germany 84

Japan 0.30.3

service sectorindustry

Newsletter No. 2, 2009

Editor: Institut der deutschen Wirtschaft Köln · Responsible: Waltraut Peter · Phone: + 49 221 4981-772 · peter@iwkoeln.de · www.iwkoeln.deLayout: Ralf Sassen, Michael Kaspers · Gustav-Heinemann-Ufer 84–88, 50968 Köln · Print: Hundt Druck GmbH, Köln

Direct Investments and Equities

No Hedge Against InflationUsing panel regression methods the authors analyze the inflation-hedging properties of different types of real estate assets. The results reveal that real estate equities like other equities do not provide any hedge against inflation. Moreover, the correlation is negative, which means that increasing prices have a negative impact on real estate returns. One explanation for this finding is that investors adjust their expectations when overall business activity weakens in response to increasing inflation. Direct investments in real estate show a more differentiated picture. While retail real estate does not provide a hedge against inflation, office as well as residential returns rise with inflation. In particular residential real estate is characterized by quite robust inflation-hedging properties assumedly due to the low substitutability of dwellings.

More information: Markus Demary · Phone +49 221 4981-744 · demary@iwkoeln.de Michael Voigtländer · Phone +49 30 27877-741 · voigtlaender@iwkoeln.de DOI: 10.2373/1864-810X.09-01-03

Further Training in Germany

Companies Spend 27 Billion EuroThe sixth IW survey of further training activities shows that 84 percent of all companies surveyed engage in formal or informal training. In 2007, average expenditure per employee (without apprentices) was 1.053 euro, of which 40 percent were direct and 60 percent indirect costs. Compared to previous surveys the direct costs have increased while the indirect costs decreased in particular for learning on the job and learning with media. Extrapolation of the results indicates that, in 2007, German companies spent a total of 27 billion euro on further training. The surveyed firms expect that the need for further training will grow over the next years.

More information: Werner Lenske · Phone +49 221 4981-884 · lenske@iwkoeln.de Dirk Werner · Phone +49 221 4981-712 · werner@iwkoeln.de DOI: 10.2373/1864-810X.09-01-04

Economic Integration of Migrants

Unequal ProgressIn general, migrants participate less in education, employment and eco-nomically relevant societal domains than natives do. Using 21 indicators the IW-Integration Monitor describes and compares the degree of migrants’ participation in the 16 federal states. It finds no evidence that the relative size of the migrant population significantly determines the integration suc-cess. In Saarland, North Rhine-Westphalia, Schleswig-Holstein and Hamburg migrants have comparatively strong educational opportunities. Their job prospects are best in Hesse, Rhineland-Palatinate, Baden-Wurttemberg, Bavaria, Bremen, and Hamburg. In Baden-Wurttenberg, Hesse, and Hamburg the integration of migrants into economically relevant societal domains has progressed relatively far. The five East German states and Lower Saxony lag behind in all three areas while Berlin performs below average in regard to educational and labor market opportunities.

More information: Ilona Riesen · Phone +49 221 4981-727 · riesen@iwkoeln.de DOI: 10.2373/1864-810X.09-01-07

Real Estate Returns and Inflation

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Sources: Deutsche Bundesbank;Investment Property Databank

total return index of different categories of real estateassets and cost-of-living index; 1998 = 100

1998 2000 2002 2004 2006

100

120

140

2007

112.6

128.3

147.5150.8offices

livinginflation

retail

Company Expenditure forFurther Training

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Methodological break in the time seriesin 2004 due to introduction of newcollecting and processing methods.Source: IW Further Training Surveys

in euro per employee

1992 1995 1998 2001 2004 2007

formal trainingstaff and other costs

964134

632

198

83990

480

268

1,127164

777

18686569

603

193

1,06970

620 +14.1%

-26.9%379

1,05369

707

277

informal training

-1.5%

Economic Integrationof Migrants in the Länder

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Source: Institut der deutschenWirtschaft Köln

maximum number of possible points = 100,lowest number = 0

education

Hamburg

Berlin

Bremen

Baden-Wurttemberg

Hesse

North Rhine-Westphalia

Bavaria

Saarland

Rhineland-Palatinate

Lower Saxony

Schleswig-Holstein

East Germany

labor market

average

20 30 40 50 60 70 80

social affairs