Do Differentials in Regional Economic Performance Diminish?
Author InfoGerhard Palme (WIFO) Abstract Over the whole period from 1971 to 1988, productivity differentials (measured by gross value added per dependent employee) between the Federal States and between administrative districts have not become smaller, though narrowing among States in the 1970s and among districts in the 1980s. Economically weak areas catch up whenever labor-intensive technologies move towards abundant supply of low-cost labor or when new stocks of raw materials are exploited. However, capital formation is accompanied by higher regional concentration, if incremental profits do not diminish with the rising level of development. Central areas endowed with an efficient transportation and communication infrastructure exhibit productivity advantages; agglomerations with intensive human capital formation mainly grow via permanent innovation. The empirical analysis concentrates on “dynamic economic areas” of similar supply structure and framework conditions for development, d
