Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/206760
Authors: 
Margarian, Anne
Hundt, Christian
Year of Publication: 
2019
Series/Report no.: 
Working Papers on Innovation and Space No. 04.19
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.
Subjects: 
rural regions
urban regions
East Germany
West Germany
employment development
structural change
industry structure
spatial externalities
shift share regression
JEL: 
O14
O18
R11
Document Type: 
Working Paper

Files in This Item:
File
Size
758.51 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.