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

Box 1 (continued)
a high degree of industrial diversification; a high population density; as well as a low distance
to other agglomerations. The explanation provided is that the proximity of firms, universities
and research institutes allowed to exploit knowledge spillovers and to draw from a pool of
qualified employees.
Table B1.1 : Change in GVA in % (constant 1995 prices) in the New Länder (excl.
Berlin), 1992-1999
1992
1993
1994
1995
1996
1997
1998
1999
Agriculture, forestry, fish.
-8.8
16.9
-3.7
6.7
3.4
-0.1
6.6
2.1
Industry (excl. constr.)
-5.8
14.6
12.3
6.4
10.6
3.6
6.4
3.5
- of which : manufacturing
1.3
19.6
20.8
8.5
8.7
9.0
9.2
4.4
Construction
31.6
17.2
22.4
2.6
-1.3
-0.2
-9.0
-3.2
Trade, tourism, transport
16.8
13.1
10.8
2.5
1.3
1.9
1.9
2.7
Finance, business services
9.7
17.1
13.6
10.8
6.3
6.2
4.8
4.0
Public and private services
14.1
0.1
5.0
4.5
-0.1
-2.5
0.0
1.0
All sectors
11.8
10.3
11.2
5.4
2.9
1.5
1.2
1.8
Source: Arbeitskreis “Volkswirtschaftliche Gesamtrechnung der Länder”, Bundesministerium für Wirtschaft
Three industries had a rather strong, spatially concentrated development in East Germany:
microelectronics, chemicals, automobiles. In all three cases there is a certain tradition from
the pre-war and GDR periods which is important with regard to the availability of skilled
labour. At the same time, many of them strongly depend on input and output linkages so that
clustering is a useful strategy for being close to suppliers, customers and skilled labour. These
industries are all very capital-intensive which reduces the importance of labour costs and is a
consequence of the generous subsidisation of productive investment in East Germany.