Business environment and enterprise behaviour in East Germany compared to West Germany and Central Europe

This paper examines institutional differences between East and West Germany and four Central European transition countries (Czech Republic, Hungary, Poland and Slovak Republic). Using enterprise survey data we show that institutional performance in East Germany is significantly different from West Germany. In addition, Central European transition countries are shown to have a similar institutional quality as East Germany in many areas. We also show that enterprises in the Central European transition countries have strongly focused on company level innovation and investment in human capital. Meanwhile, East German enterprises report investments in new products and processes as well as in skills well below the level of not only West Germany but also the Central European transition countries. Journal of Comparative Economics 36 (4) (2008) 568-583.