Sectoral Employment Elasticities in Germany

Abstract

In the last few years, unemployment has both grown and persisted in most of the western industrial countries. However, at the same time it seems that the international competition has become more fierce. A frequently expressed opinion is that the globalisation of the economy or the internationalisation of production are real challenges which the German economy has to face and to which it reacted late but obviously not too late. Bearing this in mind, the question of what contribution an accelerated economic growth could make to reduce unemployment has become more and more interesting. There are two contrasting positions in this regard:

• On the one hand it is argued, that an acceleration of investment in all sectors and divisions of enterprises may be necessary to increase the long-term growth of labour productivity, production potential and production and thereby ultimately to increase the real income. These ideas — which also correspond to the fundamentals of the “New Growth Theory” — are laid down, for example, in the most recent EU’s Greenbook (EUROPÄISCHE KOMMISSION, 1996) or the OECD’s Job Initiative (OECD, 1994 and 1995).

• On the other hand, there are doubts whether long-term growth alone might lead to a reduction of unemployment; on the contrary, it may be assumed that growth and employment are diverging. As a rule, structural factors and/or a hysteresis phenomenon on the labour market are to a large extent identified as a reason for the lack of employment. Others argue that even economic growth cannot and should not be a solution to the labour market problems of the industrial countries because of ecological reasons (the sufficiency-hypothesis).

The author is very grateful to H.J. SCHALK, T. SIEBE and R. GRASKAMP for helpful comments and assistance. As usual, the author is responsible for all remaining faults.