European Economy. Economic Papers. Germany's growth performance in the 1990's

Table 1.4: Output per capita (annual average growth)
D
(1)
F
I
UK
EUR
(2)
EU
(3)
US
JP
1971-2000
2.0
2.0
2.3
2.1
2.2
2.1
2.1
2.6
1991-2000
1.5
1.3
1.4
1.9
1.6
1.7
2.0
1.2
1991-1995
1.4
0.6
1.1
1.4
0.9
1.0
1.1
1.1
1996-2000
1.7
2.1
1.7
2.4
2.3
2.3
2.9
1.2
(1)
Data up to 1991 West Germany.
(2)
Euro-area excluding Germany, Greece, Ireland, Portugal and Spain
(3)
EU excluding Germany, Greece, Ireland, Portugal and Spain
Source : Commission services
4
In addition, re-unification triggered strong intra-German migration from the New Länder to the West. This is
reflected in the West-German population growth rate for the years 1990-91 (see previous footnote).
0 .0
0 .2
0 .4
0 .6
0 .8
1 .0
1 .2
1 9 7 0 - 1 9 8 7
1 9 8 8 - 1 9 9 3
1 9 9 4 - 2 0 0 0
E U Ave r a g e 1 9 7 0 - 2 0 0 0

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17
Box 1: The economic performance of the New Länder
5
B1.1 Output growth and production structure
GDP growth in East Germany was higher than in West Germany until 1996, but has been
slightly lower thereafter (Figure B1.1). As a consequence, GDP per capita relative to the West
increased from 40% in 1991 to somewhat above 60% in 1996, remaining more or less steady
since then.
6
Figure B1.1: Annual change in real GDP in East and West Germany, 1992-2001
(1995 prices)
Source: Arbeitskreis “Volkswirtschaftliche Gesamtrechnung der Länder”; own calculations
Economic growth in East Germany was dominated by developments in the construction
sector. A very rapid expansion of construction investment in the first half of the 1990s was
followed by a sharp decline when fiscal incentives for housing investment where phased out
(Table B1.1 and Figure B1.2). Despite this sharp decline, in 2000 the share of gross value
added (GVA) of the construction sector in the East was still more than double that of the
West. By contrast, the manufacturing sector exhibited rather high growth rates throughout the
1990s, although due its almost complete collapse after exposure to external competition from
a tiny base. Despite this catching-up process, in 2001 the share of manufacturing GVA in total
East German output was still more than 7 percentage points below the equivalent share in
West Germany. East German growth rates in the services sector were generally below those
of the West and, with the exception of public services, the share of the service sector in the
economy remains clearly below the comparable share in the West.
A further dimension of growth in East Germany is its regional pattern, which is becoming
increasingly differentiated. A cluster analysis carried out by the German Council of Economic
Experts in 1999 identified Leipzig, Dresden, Halle/Saale, Jena, Erfurt, Chemnitz and Berlin
(including Potsdam) as the main growth clusters in East Germany.
7
These regions are well
equipped with the growth determinants taken into account in the analysis, i.e. a high
productivity based on a favourable sectoral structure with many high value-added,
technology-intensive activities; a low share of agriculture; a high share of qualified workers;
5
This box mainly draws from section II of Davies/Hallet 2001.
6
Note that there are different statistical concepts of East Germany due to the specific situation of Berlin. In
labour market statistics West Berlin is attributed to West Germany and East Berlin to East Germany. In
economic accounts, however, following the revision of the methodology (to “ESA95” by the 
Arbeitskreis
“Volkswirtschaftliche Gesamtrechnung der Länder”
), there is no longer a division of Berlin so that a choice
is to be made as to which part of Germany Berlin is statistically attributed to. Here, given the dominance of
the West Berlin economy for Berlin as a whole, Berlin is attributed to West Germany.
7
Sachverständigenrat 1999, pp. 116 ff. See also Blien et al. 2001.
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
w estern Germany (incl. Berlin)
eastern Germany (excl. Berlin)

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18