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Deutschland ist keine Basarökonomie

Press Release of September 29, 2004

Value added has risen in Germany over the last ten years as a result of external trade. Consequently, according to the current DIW Berlin Weekly Report (Wochenbericht 40/2004), foreign trade has stabilized economic growth in Germany. The authors’ calculations are based on changes in the real external balance, which has increased by around 25 billion euro over the last ten years. The real external balance is equal to the difference between real exports and real imports and comprehends the value added produced by all sectors of the economy. Seen in comparison to the rest of the EU, Germany has the highest external balance of all the large EU countries.
The current DIW Berlin Weekly Report thus comes to a different conclusion than those who believe that Germany is turning into a “bazaar economy”. This term is used to describe a national economy that sells goods originating in a variety of international locations and only a few goods produced on national territory. The believers in the bazaar economy thesis identify the cause in the comparatively high wage costs found in Germany. They argue that Germany’s healthy export balance cannot be taken as an indicator that the country is highly competitive because a large share of the exported goods have actually previously been imported as intermediate goods. The current DIW Berlin Weekly Report points out that those who believe in the bazaar economy hypothesis only base their arguments on gross value added in manufacturing industry and not on the overall economic trend, including all services. Gross value added in manufacturing industry is not a suitable indicator for Germany’s competitiveness on world markets and cannot be taken as evidence that a bazaar economy is evolving.
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