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

Box 3 (continued)
€ 34.5 billion), are earmarked for railways, roads and waterways in East Germany. This is
complemented by an Operational Programme of the European Regional Development Fund
(ERDF) on transport infrastructure with a total volume of € 3.2 billion until 2006. In the context
of the Solidarity Pact, € 3.4 billion per year are foreseen for investment projects of the East
Länder
and 
Gemeinden
. Additional measures receiving public finance are on urban
development and the housing sector.
Active labour market policy (ALMP) measures are being undertaken by both national and EU
programmes by a range of programmes on training, job creation, wage subsidies, financing of
reduced working time and early retirement. ALMP in the new Länder had a financial volume of
about € 11 billion in the years 1999 and 2000 respectively. Most measures target problem
groups such as long-term, old and young unemployed. On annual average in 2000, there were
about 233,000 participants in training schemes, 192,000 in job creation schemes, 120,000 in
jobs with subsidised labour costs, 90,000 in early retirement schemes, 35,000 in youth
unemployment and 48,000 in other schemes, totalling 717,000 participants.
A joint evaluation of these different policies is not available, while there are many indicators,
studies and evaluations of single programmes. Regarding innovation and technology, most
R&D indicators show that existing firms and universities devote resources to R&D equalling
between 75% and 100% of the level in West Germany (Table B3.2). However, given the weak
economic structure in East Germany, there is a major gap when indicators are related to total
population.
Table B3. 2 : Indicators on R&D in eastern and western Germany
East
West
West = 100
R&D employees in % of all employed (1997)
3.49
4.24
82
R&D expenditure in % of total revenue (1997)
1.86
2.44
76
Patent registrations per 100,000 inhabitants (1995-98)
70
249
28
Private R&D expenditure in DEM per inhabitant (1995-97)
215
792
27
Expenditure of universities in DEM per inhabitant (1995-97)
1631
1724
95
Academic and artistic employed per 100,000 inhabitants (average
1995-98)
214
248
86
Source : DIW/IWH/IfW 2000, p.15 ; Pohl 2000, p. 228
In the context of the Joint Task, ECU 8.7 billion of a volume of ECU 30 billion were spent
between 1996 and 1998 to promote private investment. They were to create 108,000 new jobs
and to secure 300,000 existing jobs. ECU 3 billion were spent on local infrastructure projects.
23
The Joint Task foresees a regional differentiation of maximum rates of assistance to private
investment with a bias against better-performing regions, i.e. rates of assistance to private
investment are lower in those areas with higher growth.
24
The argumentation is that other
instruments such as R&D or urban policy measures will strengthen these growth clusters
anyway.
The volume of subsidies peaked in 1995 at more than ECU 18 billion and decreased to € 13
billion by 1999 (Figure B3.1). While the volume of state aid has remained fairly stable at above
€ 8 billion, the decline is mostly due to a special depreciation scheme for investment in the new
Länder,
which came to an end in 1998. An additional factor is the abolition of the wealth tax
23
Cf. Bundesregierung 1999; job estimates based on approved applications.
24
The so-called “A-areas of assistance” have maximum rates of 50% for SMEs and 35% for other firms whereas
the so-called ”B-areas of assistance” have rates of 43% and 28% respectively, the latter being, as of 1 January
2000, the labour-market regions of Berlin, Dresden, Leipzig, Jena, Schwerin, Halle/Saale, Chemnitz,
Magdeburg, Eisenach, Sonneberg, Grimma and Belzig as well as parts of the labour-market regions of Erfurt,
Weimar, Pirna, Zwickau, Bautzen and Gotha

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