The Influence of Technical Progress on Economic Growth in the GDR

The modernization of the economy played a key role in the rhetoric and politics of the German Democratic Republic’s (GDR’s) ruling socialist party and state leadership. However, empirical evidence on its contribution to economic growth is lacking. We analyze the impact of technical progress, based on staff qualifications, on productivity in the different economic sectors of the GDR between 1960 and 1989. We distinguish between academic, skilled, and other workers in our estimations and attach significant importance to qualifications as one of the fundamental drivers of sectoral productivity. Our regression results show productivity-enhancing effects of the number of academic and skilled workers, while the effects of the academic workers are much larger and longer-termed across our specifications. This quantitative analysis adds to the debate on the determinants of and obstacles to growth in the GDR.