In this project the Ifo Institute examines primarily the development of value added in manufacturing as a whole and in 18 industry sectors, separated according to the requirements for an analysis of innovation areas and value added potential. A key element of the study is the differentiation of the sectoral structural data according to company size in order to identify the specific aspects of medium-sized industrial firms. The study concentrates on the period from 1995 to 2005. The company size divisions include firms of 250 employees or less, 250 to 500 employees, 500 to 1000 employees and more than 1000 employees.
Ifo’s project portion is based above all on a differentiated evaluation of the official cost structure statistics in a time-series form from 1995 to 2005. To determine the imported purchased materials and services, the data of the official input/output tables were used. As indicators for the development of competitiveness, the corresponding responses from the Ifo Business Survey as well as the sectoral ratio of total trade turnover – exports and imports – to national income from the official statistics are included in the analysis. An international comparison with the development of the other major industrialised countries completes Ifo’s contribution to the study.
Federal Statistical Office: cost structure statistics, National Accounts, input/output tables, production, turnover and employee statistics, foreign trade statistics; Ifo Institute: Ifo Business Survey; OECD.
Although the production value of manufacturing grew in real terms by 3.7% per annum from 1995 to 2005, average value added for this period grew by only 2.0% p.a. This difference in growth in these two factors is indicative of the falling of the value-added ratio (share of a plant’s own performance in output), especially because of the growing amounts of intermediate products from abroad. Since at the same time labour productivity (value added per employee) grew by 3.0% annually, the result was a reduction in employment in manufacturing of 1.2% a year. SMEs (firms with between 20 and 499 employees) are characterised by a below-average growth in output (2.9%), a lower decline in the value-added ratio and as a result an average growth in value added, an under proportional increase in productivity and a lower reduction in employment. If manufacturing is divided into three areas of technology – cutting-edge technology, “high” applied technology and “other” technology – cutting edge technology clearly shows the strongest performance, with above average growth in value added as a result of a dynamic output development and only moderate decline in the value-added ratio. However, the weight of this category at ca. 11% of total industrial value added is relatively small. Strongly represented in the German industrial portfolio, in contrast, is the area of “high-value” technology (incl. motor vehicle production, mechanical engineering, electrical engineering, chemicals). In this area there has been an above-average decline in the value-added ratio, which is basically attributable to the strong shifts in production in vehicle construction. Surprisingly, however, in the segment of “high” applied technology, labour productivity has only risen at a below-average pace, so that the effect of the declining value-added ratio on employment has only been limited. The largest segment of German manufacturing with a value-added share of ca. 48% (2005) is the group of “other” technologies (low R&D intensity). This segment is characterised by a relatively weak output growth but an only below-average decline in the value-added ratio as well as a moderate improvement in labour productivity. As a result, the employment volume has only grown at a slightly below average pace. It is striking that the share of SMEs – in terms of value added – is particularly high in the segment of “other” technologies: for industry as a whole the share is 39% but in the segment “other” technologies it is about 48%. The study contains a further differentiation of the above-named variables according to industry branch as well as an analysis of further variables (personnel costs per employee, personnel costs as a share of production value, percentage return on sales according to the data of cost structure census).
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