Skip to main content
Log in

The impact of the 2004 EU enlargement on the performance of service enterprises in Germany’s eastern border region

  • Original Paper
  • Published:
Review of World Economics Aims and scope Submit manuscript

Abstract

We consider the impact of the 2004 EU enlargement on enterprise performance and the exporting behavior of German service enterprises in Germany’s eastern border region. Our results from regression adjusted difference-in-differences estimators combined with matching and panel data from official statistics suggest that the EU enlargement had a negative impact on the turnover and export intensity of large enterprises in the border region. For small enterprises, we find an annual increase in turnover by 2.3% in 2004 and an annual decrease in profitability by 1.5 and 1.9 percentage points in 2004 and 2005, respectively.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. It is worthwhile to note that one cannot expect that all trade barriers between the old and new member states of the European Union have been removed by the enlargement. The European Commission has documented several barriers to trade in services even among the old member states (European Commission 2002). The discussion following the publication of this report ultimately resulted in the passing of the EU services directive (“Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market”). However, for the purpose of this paper it is sufficient that some barriers have been removed by the enlargement.

  2. The results of the probit model are reported in the appendix (see Table 4).

  3. The balancing property, which requires an absence of statistically significant (and economically large) differences between the treatment group and the control group in the covariates after matching, is satisfied (see Table 5 in the appendix).

  4. See Wagner (2010) and Girma et al. (2009) for evidence on subsidies and Barrel and te Velde (2000), Czarnitzki (2005), Franz and Steiner (2000) and Klodt (2000) for evidence on wages and/or productivity.

  5. See for instance the 2004–2006 surveys “Perspectives on Trade and Poverty Reduction,” by the German Marshall Fund where about 50% of German respondents in each year had a unfavorable view of globalization and about one-third reported an unfavorable view of the common market. For an econometric analysis on the relationship between international outsourcing and job loss fears see Frijters and Geishecker (2008).

References

  • Barrel, R., & te Velde, R. W. (2000). Catching-up of East German labour productivity in the 1990s. German Economic Review, 1(3), 271–297.

    Article  Google Scholar 

  • Czarnitzki, D. (2005). Extent and evolution of the productivity deficiency in Eastern Germany. Journal of Productivity Analysis, 24(2), 209–229.

    Article  Google Scholar 

  • Egger, H., & Egger, P. (2002). How international outsourcing drives up Eastern European wages. Weltwirtschaftliches Archiv/Review of World Economics, 138(1), 83–96.

    Article  Google Scholar 

  • European Agreement. (1993). Europe agreement establishing an association between the European communities and their member states, of the one part, and the Republic of Poland, of the other part. Official Journal of the European Communities, L348, 2–180.

    Google Scholar 

  • European Agreement. (1994). Europe agreement establishing an association between the European communities and their member states, of the one part, and the Czech Republic, of the other part. Official Journal of the European Communities, L360, 2–210.

    Google Scholar 

  • European Commission. (1998). Commission regulation (EC) No. 2700/98 of 17. December 1998 concerning the definitions of characteristics for structural business statistics. Official Journal of the European Communities, L344: 49–80.

    Google Scholar 

  • European Commission. (2002). Report from the commission to the council and the European parliament on the state of the internal market for services presented under the first stage of the internal market strategy for services. Brussels: Commission of the European Communities.

    Google Scholar 

  • European Council. (1996). Council regulation (EC, Euratom) No. 58/97 of 20. December 1996 concerning structural business statistics. Official Journal of the European Communities, L014: 1–24.

    Google Scholar 

  • Franz, W., & Steiner, V. (2000). Wages in the East German transition process: Facts and explanations. German Economic Review, 1(3), 241–269.

    Article  Google Scholar 

  • Frijters, P., & Geishecker, I. (2008). International outsourcing and job loss fears: An econometric analysis of individual perceptions. Mimeo, Göttingen.

  • Gandolfo, G. (1998). International trade theory and policy. Berlin: Springer.

    Google Scholar 

  • Girma, S., Gong, Y., Görg, H., & Yu, Z. (2007). Can production subsidies foster export activity? Evidence from Chinese firm level data. (CEPR Discussion Paper 6052). London: Centre for Economic Policy Research.

  • Girma, S., Görg, H., & Wagner, J. (2009). Subsidies and exports in Germany: First evidence from enterprise panel data. (IZA Discussion Paper 4076). Bonn: Institute for the Study of Labor.

  • Görg, H., Henry, M., & Strobl, E. (2008). Grant support and exporting activity. Review of Economics and Statistics, 90(1), 168–174.

    Article  Google Scholar 

  • Hanson, G. H. (1996). Economic integration, intraindustry trade, and frontier regions. European Economic Review, 40(3–5), 941–949.

    Article  Google Scholar 

  • Klodt, H. (2000). Industrial policy and the East German productivity puzzle. German Economic Review, 1(3), 315–333.

    Article  Google Scholar 

  • Moritz, M., & Gröger, M. (2007). Labor market effects in the German-Czech border region—an empirical study using the IAB Employment Sample (IABS). Journal of Borderlands Studies, 22(2), 57–76.

    Google Scholar 

  • Scharr, F., & Untiedt, G. (2001). Sektorale Wettbewerbsfähigkeit ausgewählter Branchen in den deutschen Grenzregionen. In J. Riedel & G. Untiedt (Eds.), EU-Osterweiterung und deutsche Grenzregionen (pp. 179–244). Munich: Ifo Institute for Economic Research.

    Google Scholar 

  • Vogel, A. (2009). The German business services statistics panel 2003–2007. Schmollers Jahrbuch/Journal of Applied Social Science Studies, 129(3), 515–522.

    Google Scholar 

  • Wagner, J. (2010). Wer wird subventioniert? Subventionen in deutschen Industrie-unternehmen 1999–2006. Perspektiven der Wirtschaftspolitik (forthcoming).

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Nils Braakmann.

Additional information

All computations were done in the research data centre of the Statistical Office in Berlin. Many thanks to Ramona Voshage for building the data set and her help in many ways.

Appendix

Appendix

See Tables 4, 5, 6 and 7.

Table 4 Results of the probit model for the propensity score matching—Germany, all variables from the pre-treatment-year 2003
Table 5 Balancing property—Germany
Table 6 Difference-in-differences estimates, based on within-estimator (unbalanced panel)—Germany
Table 7 Difference-in-differences estimates, based on within-estimator (balanced panel)—Germany

About this article

Cite this article

Braakmann, N., Vogel, A. The impact of the 2004 EU enlargement on the performance of service enterprises in Germany’s eastern border region. Rev World Econ 146, 75–89 (2010). https://doi.org/10.1007/s10290-009-0042-1

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10290-009-0042-1

Keywords

JEL Classification

Navigation