Establishment survival in East and West Germany : a comparative analysis

Using a large administrative dataset and methods of survival analysis, I analyze for the period 1994-2008 whether new establishments’ survival chances differ between East and West Germany and whether they converged over time. I find that new establishments in East Germany had relatively good survival chances between 1994 and 1997, with no big differences between East and West Germany. In 1998 and 1999 the exit hazard increased strongly in East but not in West Germany, which is likely to be due to a change in the subsidy policy affecting East Germany. Since 2000 the difference in establishments’ exit hazard between East and West Germany has become smaller and towards the end of the observation period it is not statistically significant anymore.