Article CC BY 4.0
refereed
published

One economy, but different growth regimes: why Germany’s rural east is still lagging

GND
134295188
Affiliation
Thünen Institute of Market Analysis, Johann Heinrich von Thünen-Institute, Federal Research Institute for Rural Areas Forestry and Fisheries, Braunschweig, Germany
Margarian, Anne;
GND
141223790
ORCID
0000-0002-5202-830X
Affiliation
Thünen Institute of Market Analysis, Johann Heinrich von Thünen-Institute, Federal Research Institute for Rural Areas Forestry and Fisheries, Braunschweig, Germany
Hundt, Christian

Purpose
This study aims to elucidate the quantitative and qualitative differences in employment development between German districts. Building on ideas from competitive development and resource-based theory, the paper particularly seeks to explain enduring East-West differences between rural regions by two different forms of competitive advantage: cost leadership and quality differentiation.
Design/methodology/approach
This study follows a two-step empirical approach: First, an extended shift-share regression is conducted to analyze employment development in Western and Eastern German districts between 2007 and 2016. Second, the competitive share effect and other individual terms of the shift-share model are further examined in additional regressions using regional economic characteristics as exogenous variables.
Findings
The findings suggest that the above-average employment growth of the rural districts in the West is owed to the successful exploitation of experience in manufacturing that has been gathered by firms in the past 100?years or so. While their strategy is largely based on advanced and specialized resources and an innovation-driven differentiation strategy, the relatively weak employment development of Eastern rural districts might be explained by a lack of comparable long-term experiences and the related need to focus on the exploitation of basic and general resources and, accordingly, on the efficiency-based strategy of cost leadership.
Originality/value
This study offers an in-depth empirical analysis of how the competitive share effect, i.e. region-specific resources beyond industry structure, contributes to regional employment development. The analysis reveals that quantitative differences in rural employment development are closely related to qualitatively different levels of input factors and different regimes of competitiveness.

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