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Regional employment trends of wood-based

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Eur J Forest Res
DOI 10.1007/s10342-009-0258-6
REVIEW
Regional employment trends of wood-based industries
in Germany’s forest cluster: a comparative shift-share analysis
of post-reunification development
Dajana Klein Æ Uwe Kies Æ Andreas Schulte
Received: 5 May 2008 / Revised: 29 October 2008 / Accepted: 22 December 2008

Springer-Verlag 2009
Abstract After reunification in 1990, Germany’s forest
cluster developed anew and employment in the wood-
based industries differentiated very quickly. With more
than 900,000 employees, it is now considered one of the
most important industrial sectors in the country. This paper
analysed general trends in the development of employment
of wood-based industries in the German forest cluster
between 1999 and 2006. Shift-share analysis was consid-
ered to be the most appropriate way to determine regional
differences in the subsection DD/20 ‘Manufacture of wood
and wood products’ of the code ‘‘Classification of Eco-
nomic Activities in the European Community, Revision
1.1’’ (NACE): the sawmill industry, the wood-based panel
industry, the wood construction industry, the wood-based
packaging industry, and the miscellaneous wood products
industry. This method decomposed the change of
employment into three different components that are due to
that change: national trends, (industrial) sectoral trends,
and regional conditions. Employment in the selected wood-
based industries showed a significantly larger decrease than
overall trends in both the producing industries and the
whole economy of Germany: a continual loss of employees
could be observed over the time period, affecting almost all
of the selected wood-based industries. However, federal
states in western and eastern Germany experienced diver-
gent trends between 1999 and 2006, as different absolute
and relative regional share components indicated in the
shift-share analysis. This method allows of identifying
Communicated by M. Moog.
D. Klein (&)
U. Kies
A. Schulte
Wald-Zentrum, Westfälische Wilhelms-Universität Münster,
Robert-Koch-Str. 27, 48149 Munster, Germany
e-mail: dajana.klein@wald-zentrum.de
regional disparities and characterising regions with positive
(mainly eastern federal states) and negative (mainly wes-
tern federal states) rates of employment growth. The
research suggests that positive employment trends in
eastern Germany’s wood-based industries can mainly be
attributed to regional factors such as comparatively higher
subsidies for new investments, lower labour costs, lower
land values or infrastructural peculiarities.
Keywords Shift-share analysis
Forest cluster

Wood-based industries
Labour market
Employment

Germany
Economic transformation process
Introduction
The economic development in the Federal Republic of
Germany remains influenced by the economic transfor-
mation process in the eastern federal states following the
reunification of East Germany and West Germany1 in
1990.2 In terms of key labour market indicators, the eastern
states continue to lag far behind western Germany. In 2006,
the unemployment rate amounted to 17.3% in eastern
Germany: far higher than in the western federal states with
9.1% (Bundesagentur für Arbeit 2007).
In addition to Germany’s reunification, changing market
conditions in a globalised economy have led to a strong
restructuring of the forest cluster, including redevelopment
of the wood-based industries and rapid differentiation
1
For a general profile of the eastern and western federal states of
Germany, see Table 1.
2
For an overview of the process of reunification and convergence of
eastern and western Germany, see Lange and Pugh (1998). For a
description of regional differences, see Blien et al. (2006) and
Suedekum et al. (2006).
123

Fig. 1 Forest cluster definition
Forestry
on the basis of the statistical
classification of economic Primary wood
activities in the European processing
Community, Revision 1.1 (Kies
Secondary
et al. 2008)
Wood industry
wood-based
manufacturing
Forest Cluster
Wood crafts in
construction
Timber trade
Paper
industry
* includes: 51.53.2 Wholesale of wood in the rough, 51.53.3 Wholesale of
products of primary processing of wood, 52.44.6 Retail sale of wood
between eastern and western Germany. In this context it
should be noted that the German Federal government has
been subsidizing the economic development of eastern
Germany since reunification by an annual support of
approximately 80 billion euros, which sets regions of
eastern Germany apart from any other regions of the
European Union (Blien and Wolf 2002). In some years,
regional investment subsidies in eastern Germany were ten
times higher than in western Germany (Bundesministerium
der Finanzen 1999). Wood-based industries in eastern
Germany also profited from subsidies encouraging
investment.
Blien and Wolf (2002) analysed structural changes and
general activity changes in the overall employment of
eastern Germany, and defined the role of the regional
industry structure, the qualification structure of the local
workforce, genuine regional factors, the size distribution of
establishments and the regional concentration of industries
as key factors influencing employment trends.
Industries that are linked through close relationship to a
particular use of resources or form of production, spatial
concentration or high connectivity in terms of business
activities are described as ‘clusters’. In line with related
approaches (e.g. industrial districts, stakeholder networks,
centres of innovation, regional development), the cluster
concept has been widely adopted in economics (Stimson
et al. 2006; Organisation for Economic Co-operation and
Development 1999; Porter 1998).
Forest and wood-based industries (which by definition all
comprise economic activities with a close linkage to the
common resource wood) constitute a complete industrial
sector in the economic system. The ‘forest cluster’ incor-
porates raw timber producing forestry enterprises, industries
123
Eur J Forest Res
Forestry and logging (02) Agriculture (A)
Sawmilling (20.1)
in the European Union (NACE Rev.1.1)
Wood-based panels (20.2)
Classification of Economic Activities
Manufacture of wood
Wood construction (20.3) and wood products
(DD)
Wood-based packaging (20.4)
Misc. wood products (20.5)
Furniture (36.1) Furniture (DN 36 )
Carpentry (45.22.3)
Joinery installation (45.42) Construction (F)
Parquet laying (45.43.1)
Timber trade (51* ) Trade (G)
Pulp, paper,paperboard (21.1)
Paper articles (21.2) Manufacture of pulp,
Publishing (22.1) paper (DE)
Printing (22.2)
in the processing and manufacturing of semi-finished wood,
pulp and paper products and downstream wood-based
manufacturing industries, as per the official systematic
Classification of Economic Activities in the European
Community, Revision 1.1 (NACE) and the German Classi-
fication of Economic Activities, Revision WZ 2003
(Statistisches Bundesamt Deutschland 2003; Statistical
Office of the European Communities 2002; Commission of
the European Union 1999). However, allocating these
industries to separate sections of the NACE results in a
segregated statistical assessment of wood-based activities
and a misconception (or distortion) of the sector’s actual size
in national economies (Fig. 1) (Kies et al. 2008).
In Germany, recent cluster analysis approaches have
offered a new view of the forest and wood-based industries,
revealing the significant (and underestimated) economic
impact of the forest sector on both national and sub-
national/state levels (Kies et al. 2008; Jaensch and Harsche
2007; Kramer and Möller 2006; Schulte and Mrosek 2006;
Seegmüller 2005; Mrosek et al. 2005; Schulte 2002,
2003a). In terms of employment the forest cluster is con-
sidered to be one of the most important industrial sectors in
Germany ranking high among comparable national sectors.
With more than 900,000 employees in 2004 and a per-
centage share of 11.2% of the manufacturing industries in
Germany, the forest cluster was more important than the
manufacture of food products (10.0%) or the manufacture
of textiles (2.3%) and slightly less important than the
manufacture of transport equipment (12.8%) or the
manufacture of machinery (14.8%). The forest cluster also
revealed strong industrial agglomerations (regional clus-
ters) of individual wood-based industries (Kies et al. 2008;
Mrosek et al. 2005).
Eur J Forest Res

To date, these studies have focused on macroeconomic analysis tool for exploratory targeting of regional industrial
assessments of the forest cluster within a particular geo- dynamics (Blien and Wolf 2002; Esteban 2000; Dinc et al.
graphical context (e.g. federal state). However, neither 1998; Tassinopoulos 1996).
employment trends in the forest sector in general nor Shift-share analysis has developed over time, and criti-
regional employment differences within a larger geo- cism in the scientific discourse applies to the method’s
graphical context have ever been investigated. Empirical applicability, accuracy and limited explanatory functions
research has not yet answered the questions whether for factors affecting growth dynamics. The method has
employment in Germany’s wood-based industries shows been modified by numerous extensions and adaptations of
regional disparities as well as in which way and to what varying complexity, yet the standard model first introduced
extent eastern and western federal states have been affected by Dunn (1960) remains a valid analytical tool that can
by the economic transformation process following Ger- adequately present general differential effects (Dinc et al.
many’s reunification. We propose the hypothesis that over 1998). Examples of previous shift-share analysis approa-
the observed period employment in wood-based branches ches in the forest sector can be found in Bilek and Ellefson
has developed differentially in federal states and especially (1984) and Størdal et al. (2004).
in eastern compared to western Germany. Furthermore, we The conventional shift-share model by Dunn (1960),
assume that wood-based industries are shifting from wes- which identifies general differential employment changes
tern to eastern Germany. among different regional units and industries, has been
The overall objective of this study is to analyse regional applied in this analysis, as per Stimson et al. (2006); Dinc
employment trends of five wood-based industries in the et al. (1998) and Ashby (1970). The model divides regional
German forest sector on the federal state level. Choosing employment changes into component parts that are used to
these five primary processing and manufacturing industries explain regional disparities and are traced back to specific
that are collected under the NACE subsection DD ‘wood regional structures. Specifically, the model decomposes
industry’, as defined by the Statistical Office of the Euro- economic change (in terms of employment growth or
pean Communities (2002) and the Statistisches Bundesamt decline) observed over a particular time interval into three
Deutschland (2003), offers the opportunity for consistent components: national share (NS), industrial mix (IM) and
comparisons within the NACE system. The study’s regional share (RS) (Formula 1 and 2).
empirical focus is a comparative analysis of the develop-  tþ1   tþ1 
t En t Ein Entþ1
ment of employment in Germany’s federal states. DEir  Eir  1 þ Eir t  Et
Et Ein
Furthermore, the study focuses in particular on the devel- n tþ1 tþ1  n
t Eir Ein
opment of employment separated into eastern and western þ Eir  t ð1Þ
Eirt Ein
federal states. The specific objectives of that research are
to: (a) quantify total employment changes in different or
wood-based industries; (b) analyse differential effects of
DEir  NS þ IM þ RS ð2Þ
these changes in each region and (c) decompose the
employment changes in the federal states into national
growth effects and regional competitive effects.
NS National share
IM Industrial mix
RS Regional share
Methods
E Employment
i Industry
Shift-share analysis
r Region
n Reference area
Shift-share analysis is a commonly used technique in
t Employment at time t
regional science. Knudsen’s (2000) literature survey
t ?1 Employment at time t ? 1
reports, it is a well-established analytical tool among
planners, geographers and regional scientists and has been Regional employment is investigated in relation to a
applied in various fields of regional economy. However, superior reference area (in most cases, a nation). (E) rep-
employment growth and decline remain the primary focus resents the employment level of an industry (i) in a region
of research. Going beyond a mere comparison of absolute (r) or in the reference area (n). Employment at the begin-
and relative employment changes, shift-share analysis ning of the determined time period is represented by t and
offers a quantitative compilation of diverging employment at the end of the period by t ? 1.
trends among geographical units. Its simple, intuitive logic The NS component measures the employment change
and uncomplicated data requirements make it a well-suited that could have been expected if the region had grown at

123

the same rate as the corresponding reference area. Since
regions are part of the reference area, and therefore influ-
enced by these overall conditions and trends, it is assumed
that any positive (or negative) change in employment at the
reference area level will involve a corollary rising (or
declining) change in regional employment.
The IM component represents the share of regional
economic change attributable to a region’s specialisation in
industries with rapid (or slow) growth at the national level
(reference area). Regions with a large share of employees
in an industry growing rapidly (or slowly) on the national
level will therefore also have high (or low) IM components.
As this component determines employment changes within
a specific industry in relation to overall employment trends
in the national economy, it also indicates overall employ-
ment trends in each industry. However, since this analysis
concentrates on specific regional trends, the IM component
results are not presented in detail.
The RS component measures regional employment
change in an industry conditioned by regional factors. It is
defined as the difference between an industry’s regional
growth (or decline) and the industry’s reference area
growth (or decline). The effect of specific regional factors
on employment growth (or decline) in a regional industry is
determined by subtracting overall national growth impact
from absolute regional change. Of course, some regions
and industries generally grow faster than others, indepen-
dent of periods of nationwide prosperity. On the regional
level, this competitive advantage can be attributed to sev-
eral factors, including (but not limited to) natural resources,
entrepreneurial capacity and regional policy effects.
Although shift-share analysis provides no explanation of
such (dis)advantages, the RS component can be used to
indicate, which regional industries perform well in terms of
employment change.
Research design
Germany, a country with an area of more than
350,000 km2 and a population of 82.3 million people
(2006), is divided into 16 federal states (13 territorial
states and 3 city states), that range considerably in size,
population and employment (Fig. 2; Table 1). For the
purpose of this shift-share analysis, federal and city states
are designated as regions and the Federal Republic of
Germany as the reference area. The federal states are
further examined in two separate subgroups: the old West
German States (western Germany) and the newly-formed
German States (eastern Germany). Although the city
states and the federal state of Saarland are included in all
calculations, these results are not presented here owing to
the small geographical size and minor economic impact
of these regional units.
123
Eur J Forest Res
This analysis uses data from the official labour market
statistics maintained by the German Federal Employment
Agency (Bundesagentur für Arbeit), which surveys all
employees with social insurance registration (except civil
servants and the self-employed). These data are available
on a monthly basis for all industries under NACE (Bun-
desagentur für Arbeit 2007; Statistical Office of the
European Communities 2002). We selected a data set for
the period from 1999 to 2006 because pre-1999 employ-
ment data refer to an earlier version of the NACE-based
German Classification of Economic Activities (WZ 1973),
and hence time series results for the forest sector are not
directly comparable.
Over this eight year period, all but one of the investi-
gated industries showed continuous trends in employment
(Table 2), allowing for a methodologically consistent shift-
share approach with a start year of 1999 and an end year of
2006. We analysed all industry branches of the NACE
subsection DD/20 ‘Manufacture of wood and wood prod-
ucts’: the sawmill industry (NACE 20.1); the wood-based
panel industry (NACE 20.2); the wood construction
industry (NACE 20.3); the wood-based packaging industry
(NACE 20.4); and the miscellaneous wood products
industry (NACE 20.5). As primary and secondary wood
processing industries with a completely wood-based pro-
duction, all these industries are directly linked to the
resource wood.
The producing industries are a commonly used statis-
tical reference unit in Germany, representing the
aggregate of NACE sections C (Mining and quarrying), D
(Manufacturing), E (Electricity, gas and water supply) and
F (Construction) (Statistical Office of the European
Communities 2002). The wood industry aggregate (NACE
DD/20) is categorised under the Manufacturing section
(NACE D), making its development in relation to the
overall trend of the producing industries a legitimate
comparison. Therefore we excluded other industries such
as pulp and paper industry, which can be analysed in
further research.
Shift-share calculations produce results in absolute
values, which impedes a direct comparison of geographical
units of different size. To facilitate a comparison between
federal states as well as between eastern and western
Germany, which vary considerably in geographical and
economic size (Table 1), the RS component’s absolute
values were also transformed to relative values. Regional
employment shift in absolute figures was compared to
absolute employment at the beginning of the period (i.e.,
employment in 1999) to derive a percentage deviation of
the RS (Tables 4, 5). A peculiarity of the shift-share results
has to be noted in Table 5: considering Formula 1 applied
to a space subdivision of only two regions (e.g. eastern and
western Germany), the absolute RS of a total shift are equal
Eur J Forest Res
Fig. 2 Map of the federal states
of Germany 2008
by definition. The small differences in absolute values
between eastern and western Germany are explained by the
fact that the city states and Saarland are excluded from the
analysis. These absolute values serve only for a comparison
among the industries of the amount of the regional losses
and gains in employees.
Results
National employment trends in the selected wood-based
industries
Considerable variation exists in the absolute numbers of
employees within the selected wood-based industries of the
German forest sector (Table 2). In 2006, the wood
construction industry (more than 59,000 employees) was
the strongest industry in this regard, followed by the saw-
mill industry (more than 29,000 employees). The
investigated wood-based industries were characterised by
strong negative employment trends over the observed
period of time, with the exception of the wood-based
packaging industry remaining stable (increasing by only
?0.5%). The miscellaneous wood products industry
experienced the strongest negative trend (-35%) in
employment. Overall, a continuous negative employment
trend of -26% in the German wood industry (NACE 20)
can be noticed between 1999 and 2006: a loss of around
46,300 jobs. The wood industry’s negative employment
trend was far stronger than the trends in both the producing
industries (-16%) and the German economy as a whole
(-4%) over the same period.
123
 Eur J Forest Res

Table 1 Land area, forest cover, urban area, population, employment and unemployment in the federal states of Germany (Bundesagentur für
Arbeit 2007; Statistische Ämter des Bundes und der Länder 2007)
Land area Forest Urban Population Employment Unemployment
2006 cover area 2006 2006 1999–2006 2006
2
(tsd. km ) (%) (%) (%) (mio.) (%) (mio.) (%) (mio.) (%)a

Baden-Württemberg 35.8 10.0 38.1 13.6 10.7 13.0 3.7 0.7 0.3 6.3
Bavaria 70.6 19.8 34.9 10.8 12.5 15.2 4.3 1.4 0.4 6.8
Bremen 0.4 0.1 1.9 56.5 0.7 0.8 0.3 -3.0 0.0 14.9
Hamburg 0.8 0.2 5.8 58.6 1.8 2.1 0.8 1.0 1.0 11.0
Hesse 21.1 5.9 40 15.1 6.1 7.4 2.1 -1.0 0.3 9.2
Lower Saxony 47.6 13.3 21.2 13.1 8.0 9.7 2.3 -3.0 0.4 10.5
North R.-Westphalia 34.1 9.5 24.9 21.6 18.0 21.9 5.6 -4.0 1.0 11.4
Rhineland-Palatinate 19.9 5.6 41.5 13.8 4.1 4.9 1.2 -1.0 0.3 8.0
Saarland 2.6 0.7 33.4 20.1 1.0 1.3 0.3 -3.0 0.1 9.9
Schleswig-Holstein 15.8 4.4 10 11.9 2.8 3.4 0.8 -3.0 0.1 10.0
Western Germany total 248.5 69.6 30.6 14.1 65.7 79.8 21.3 21.4 3.0 9.1
Berlin 0.9 0.2 18.0 69.4 3.4 4.1 1.0 -9.0 0.3 17.5
Brandenburg 29.5 8.3 35.1 8.6 2.5 3.1 0.7 -15.0 0.2 17.0
Meckl.-W. Pomerania 23.2 6.5 21.4 7.2 1.7 2.1 0.5 -17.0 0.2 19.0
Saxony 18.4 5.2 26.8 11.7 4.2 5.2 1.3 -14.0 0.4 17.0
Saxony-Anhalt 20.4 5.7 23.9 10.3 2.4 3.0 0.7 -16.0 0.2 18.3
Thuringia 16.2 4.5 31.9 9.0 2.3 2.8 0.7 -15.0 0.2 15.6
Eastern Germany total 108.6 30.4 28.0 9.7 16.6 20.2 5.0 214.1 1.5 17.3
Germany total 357.1 100.0 29.8 12.8 82.3 100.0 26.4 24.1 4.5 10.8
a
Unemployed proportional to all civilian labour force

Table 2 National employment trends in selected wood-based industries in Germany, 1999–2006 (absolute figures in thousand) (Bundesagentur
für Arbeit 2007)
NACE Wood-based industries and aggregates 1999 2001 2003 2004 2005 2006 Change 1999–2006 Change (%)

20.1 Sawmilling 36.7 33.7 30.4 30.3 29.5 29.2 -7.5 -20.4
20.2 Wood-based panels 21.3 20.4 18.0 17.8 17.0 16.0 -5.3 -24.9
20.3 Wood construction 82.9 77.5 67.0 64.2 60.3 59.2 -23.7 -28.6
20.4 Wood-based packaging 10.4 10.1 10.0 10.3 10.3 10.4 0.1 0.5
20.5 Miscellaneous wood products 28.4 26.9 22.7 21.5 19.9 18.6 -9.9 -34.7
20 Wood industry total 179.7 168.6 148.0 144.1 136.9 133.4 -46.3 -25.8
C–F Producing industries 10,036.3 9,737.5 9,054.4 8,787.6 8,553.8 8,480.8 -1,555.6 -15.5
A–O Economy total 27,482.6 27,817.1 26,954.7 26,524.0 26,178.3 26,354.3 -1,128.2 -4.1

Regional employment trends in the federal states
In terms of regional employment distribution in Germany’s
federal states, the results show pronounced disparities
among wood-based industries. Also, absolute concentra-
tions of employment can be identified (Table 3).
• In 2006, the sawmill industry was concentrated in two
federal states in southern Germany: around 15,000
(more than 50%) of total employees in this industry
were located in Baden-Wuerttemberg and Bavaria.
• The wood-based panel industry could be localised in
the state of North Rhine-Westphalia, which represents
around 5,800 (more than 37%) of total employees in
this German industry.
• The highest absolute employment figures for the wood
construction industry occurred in Bavaria (around

123
Eur J Forest Res

Table 3 Regional employment in selected wood-based industries in federal states of Germany: absolute values (thousand) for 2006 and relative
change (%) over 1999–2006 (Bundesagentur für Arbeit 2007) excluding Saarland and City States (Berlin, Bremen, Hamburg)
Sawmilling Wood-based Wood Wood-based Miscellaneous Wood industry
(NACE 20.1) panels construction packaging wood products total (NACE 20)
(NACE 20.2) (NACE 20.3) (NACE 20.4) (NACE 20.5)
Absolute Relative Absolute Relative Absolute Relative Absolute Relative Absolute Relative Absolute Relative

Baden- 8.0 -13.2 1.8 -30.2 10.8 -27.2 1.4 5.0 3.9 -18.1 26.0 -20.9
Wuerttemberg
Bavaria 6.9 -19.9 1.3 -63.8 15.8 -22.2 1.4 -11.8 3.2 -43.5 28.6 -27.9
Hesse 1.6 -34.0 0.4 -55.4 5.4 -37.4 1.2 17.8 0.6 -61.3 9.2 -36.1
Lower Saxony 2.2 -37.4 1.5 -30.6 2.8 -42.4 0.8 39.1 1.5 -22.4 8.7 -32.7
North Rhine- 3.7 -31.1 5.8 -26.5 10.7 -26.8 3.0 -9.1 4.7 -40.7 27.8 -28.6
Westphalia
Rhineland- 1.5 -25.0 0.9 -24.2 5.2 -26.0 0.4 1.4 0.7 -34.5 8.7 -25.4
Palatinate
Schleswig-Holstein 0.4 -42.4 0.1 -6.4 1.0 -26.2 0.2 -7.3 0.3 -15.4 2.0 -26.1
Western Germany 24.3 224.0 11.8 236.0 51.6 228.0 8.4 20.3 14.7 235.9 110.9 227.5
total
Brandenburg 0.9 -14.9 1.1 18.2 1.3 -23.1 0.2 -21.7 0.5 -8.7 3.9 -10.6
Meckl.-W. 0.7 16.9 0.6 731.0 0.8 -23.1 0.2 60.7 0.4 -43.5 2.7 7.6
Pomerania
Saxonia 1.1 0.3 0.9 41.0 1.8 -20.7 0.4 -20.6 2.0 -21.6 6.2 -12.1
Saxony-Anhalt 0.2 -26.8 0.5 487.4 1.0 -29.2 0.2 5.4 0.2 -48.3 2.1 -9.2
Thuringia 1.7 46.8 0.6 11.5 1.5 -52.3 0.4 42.5 0.6 -47.1 4.6 -23.1
Eastern Germany 4.6 10.0 3.7 64.0 6.3 233.0 1.4 5.1 3.6 230.3 19.5 212.3
total
Germany total 28.9 220.0 15.5 -25.0 57.9 228.0 9.8 0.4 18.3 234.9 130.4 225.6

16,000), followed by Baden-Wuerttemberg and North
Rhine-Westphalia (around 11,000 each).
• The wood-based packaging industry (around 3,000;
30% of total employees) and the miscellaneous wood
products industry (around 4,700; more than 25% of
total employees) were primarily located in North
Rhine-Westphalia.
The relative employment changes allow for comparison
of the extent of change between the federal states (Table 3)
and reveal notable regional differences, including:
• The sawmill industry lost 24% of the jobs in all western
states, while it increased in eastern Germany by 10%.
• The strongest positive employment changes in the
sawmill industry occurred in Thuringia (?47%) and
Mecklenburg-Western Pomerania (?17%), both
located in eastern Germany.
• Employment in the wood-based panel industry
decreased by 36% in western Germany, in strong
contrast to federal states in eastern Germany, which
gained 64% of new jobs over the period.
• Growth rates in the wood-based panel industry were
strongest in Mecklenburg-Western Pomerania
(?731%) and Saxony-Anhalt (?487%), which can be
attributed to the construction of new processing plants
in these regions.
• Mecklenburg-Western Pomerania is the only federal
state, which exhibited a positive employment growth in
the wood-based industries at all (?8%).
• Compared to western Germany, the eastern states
showed greater relative employment growth in the
wood-based packaging industry (?5%), the sawmill
industry (?10%) and the wood-based panel industry
(?64%). All the other industries exhibited similar
trends for eastern and western Germany.
Shift-share analysis of the federal states
Since overall economic development and industry struc-
tures vary by region, total shifts do not allow for an
assessment of specific regional trends. Shift-share ana-
lysis results identify employment shares attributable to
overall economic conditions (NS), overall development
of an industry (IM) or specific development of a region
(RS).
The NS results indicate the potential employment
change within each industry if regional development had
grown at the same rate as the overall negative national

123
 Eur J Forest Res

trend of -4% (Table 2). NS values vary within each fed-
eral state and industry (Figs. 3, 4, 5, 6, 7), depending on the
absolute employment figure of each state and industry at
the beginning of the time period. The most remarkable
results are:
• NS components are smaller for all industries and all
federal states than the IM and RS components. Thus
only a minor portion of these negative employment
changes were due to overall development of employ-
ment in the German economy.
• Although some federal states showed slight positive
developments in some industries (Table 3), these
positive trends were attenuated by downward pressure
from Germany’s overall negative employment trend.
• The highest value of the NS component of all industries
under study appeared in the Bavarian wood
construction industry (Fig. 5). This federal state would
have lost more than 800 jobs had it matched the overall
rate of employment change in Germany.
The IM component reflects employment changes at the
regional level as a function of national industry trends and
regional industry size. Thus it is suitable for comparison of
industries within one region—yet the purpose of this study
is to compare regional differences. However, in the results
presented here (Fig. 3, 4, 5, 6, 7), the IM component, spe-
cifically its percentage of the total shift compared to the NS
and RS, allows identifying the particular overall industry
trends and the size of the industry in the particular region.
The RS component highlights those federal states that
gained (or lost) employees due to specific regional condi-
tions. A positive RS suggests that a federal state offered
locational advantages. In addition to the absolute figures,

Fig. 3 Employment shift in the Western Germany

sawmill industry (NACE 20.1) Bavaria
in federal states of Germany,
total shift 1999–2006 per state N. R.-Westphalia
in ascending order Lower Saxony
B.-Wuerttemberg
Hesse
Rhinel.-Palatinate
Schleswig-Holstein

Eastern Germany
Brandenburg
Saxony-Anhalt National Share
Saxonia Industrial Mix
M.-W. Pommerania Regional Share
Thuringia

-2000 -1500 -1000 -500 0 500 1000

Fig. 4 Employment shift in the Western Germany

wood-based panel industry Bavaria
(NACE 20.2) in federal states of
Germany, total shift 1999–2006 N. R.-Westphalia
per state in ascending order B.-Wuerttemberg
Lower Saxony
Hesse
Rhinel.-Palatinate
Schleswig-Holstein

Eastern Germany
Thuringia
Brandenburg National Share
Saxonia Industrial Mix
Saxony-Anhalt
Regional Share
M.-W. Pommerania

-2500 -2000 -1500 -1000 -500 0 500 1000

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Eur J Forest Res

Fig. 5 Employment shift in the Western Germany

wood construction industry
Bavaria
(NACE 20.3) in federal states of
B.-Wuerttemberg
Germany, total shift 1999–2006
per state in ascending order N. R.-Westphalia
Hesse
Lower Saxony
Rhinel.-Palatinate
Schleswig-Holstein

Eastern Germany
Thuringia
Saxonia
National Share
Saxony-Anhalt
Industrial Mix
Brandenburg
Regional Share
M.-W. Pommerania

-6000 -5000 -4000 -3000 -2000 -1000 0 1000 2000

Fig. 6 Employment shift in the Western Germany

wood-based packaging industry
N. R.-Westphalia
(NACE 20.4) in federal states of
Germany, total shift 1999–2006 Bavaria
per state in ascending order Schleswig-Holstein
Rhinel.-Palatinate
B.-Wuerttemberg
Hesse
Lower Saxony

Eastern Germany
Saxonia
Brandenburg
Saxony-Anhalt National Share
Industrial Mix
M.-W. Pommerania
Regional Share
Thuringia

-500 -400 -300 -200 -100 0 100 200 300

Fig. 7 Employment shift in the Western Germany

miscellaneous wood products N. R.-Westphalia
industry (NACE 20.5) in federal
Bavaria
states of Germany, total shift
1999–2006 per state in Hesse
ascending order B.-Wuerttemberg
Lower Saxony
Rhinel.-Palatinate
Schleswig-Holstein

Eastern Germany
Saxonia
Thuringia
National Share
M.-W. Pommerania
Industrial Mix
Saxony-Anhalt
Regional Share
Brandenburg

-3500 -3000 -2500 -2000 -1500 -1000 -500 0 500 1000

123
 Eur J Forest Res

which describe the amount of change in a particular state
and industry, relative RS values indicate the potential for
regional employment shifts to influence the total shift
(Table 4).
The highest absolute values for RS components in the
sawmill industry occurred in Thuringia (?756) and Baden-
Wuerttemberg (?665), suggesting these federal states had
locational advantages for sawmill industry development on
an approximately comparable level (Fig. 3). However, the
relative RS values reveal a divergent effect on the federal
states. In Baden-Wuerttemberg, the influence of RS on the
total change was a rate of only 7% (Table 4), insufficient to
effect any positive change (Table 3). In Thuringia, how-
ever, the RS component influenced the total change at a
rate of ?67% (Table 4), resulting in general growth for that
industry (Table 3).
The wood-based panel industry’s highest RS values in
both absolute and relative terms occurred in Mecklenburg-
Western Pomerania (537 employees or 756%) and Saxony-
Anhalt (446 employees or 512%) (Fig. 4; Table 4),
indicating that RS impacted the total shift more than either
NS or IM in these cases. Positive development in these two
federal states was almost entirely attributable to the RS
component. Furthermore, all federal states in eastern Ger-
many in the wood-based panel industry also revealed
positive RS components. Even though the hub of this
industry (i.e., majority of employees) was located in wes-
tern states, western Germany experienced a loss in almost
all federal states, most notably Bavaria. In contrast, eastern
German states experienced a growth in the number of
employees due to the RS component.
Bavaria’s RS value in the wood construction industry
represented around 1,300 employees: the highest value for
that industry (Fig. 5). However, Bavaria’s relative value
reveals it had no significant effect on the overall change in
Bavaria’s wood construction industry or influence over the
general negative development of this industry in Bavaria
(Table 3). Altogether, the relative RS components were
less divergent in the wood construction industry than in the
other wood-based industries.
Federal states with positive values for the RS component
in the wood-based packaging industry—Baden-Wuerttem-
berg, Hesse, Mecklenburg-Western Pomerania, Lower
Saxony, Rhineland-Palatinate, Saxony-Anhalt and Thurin-
gia—have all gained employees due to locational
advantages. In Mecklenburg-Western Pomerania, the RS
component increased employment by ?60% (Table 4),
which was more than the NS and IM component.
The RS component of the miscellaneous wood products
industry was highest in the federal state of Baden-Wuert-
temberg (Fig. 7), indicating a locational advantage in this
industry. However, only ?17% of the employment shift in
this industry in Baden-Wuerttemberg was due to RS
component (Table 4). Locational advantages were also
unable to produce a net gain of employees in this industry
for the federal state of Brandenburg despite a relative RS
component of ?26% (Table 4).
Over the period from 1999 to 2006, western Germany
and eastern Germany experienced divergent employment
trends in the industries under study. This is evidenced by
both different absolute RS components and the relative RS
components results (Table 5).

Table 4 Regional share of the employment shift in selected wood-based industries in federal states of Germany, 1999–2006 [relative shift (%) in
relation to 1999] excluding Saarland and City States (Berlin, Bremen, Hamburg)
Sawmilling Wood-based panels Wood construction Wood-based packaging Miscellaneous wood
(NACE 20.1) (NACE 20.2) (NACE 20.3) (NACE 20.4) products (NACE 20.5)

Baden-Wuerttemberg 7.2 -5.3 1.4 4.5 16.6

Bavaria 0.5 -38.8 6.4 -12.3 -8.8
Hesse -13.6 -30.5 -8.8 17.2 -26.6
Lower Saxony -17.0 -5.7 -13.8 38.6 12.2
North Rhine-Westphalia -10.7 -1.5 1.8 -9.6 -6.1
Rhineland-Palatinate -4.6 0.7 2.6 0.9 0.2
Schleswig-Holstein -22.0 18.5 2.4 -7.9 19.3
Western Germany total 23.2 210.6 0.8 20.8 21.2
Brandenburg 5.5 43.1 5.5 -22.2 26.0
Meckl.-W. Pomerania 37.3 755.9 5.5 60.2 -8.8
Saxonia 20.7 66.0 7.9 -21.2 13.0
Saxony-Anhalt -6.4 512.3 -0.7 4.9 -13.7
Thuringia 67.2 36.5 -23.7 42.0 -12.4
Eastern Germany total 30.0 89.1 24.3 4.6 4.4

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Eur J Forest Res
Table 5 Regional share of the employment shift in selected wood-based industries in western Germany and eastern Germany, 1999–2006
[absolute and relative shifts (%) in relation to 1999] excluding Saarland and City States (Berlin, Bremen, Hamburg)
Sawmilling Wood-based panels
(NACE 20.1) (NACE 20.2)
Absolute Relative Absolute Relative
Western Germany total -1,025 -3.2 -1,939 -10.6
Eastern Germany total 1,247 30.0 2,000 89.1
All but one of the assessed industries showed positive
absolute RS values for eastern Germany, and contrasting
negative absolute RS components for western Germany.
Only the wood construction industry presented contrary
results: i.e., negative values for eastern Germany and
positive values for western Germany (Table 5).
For an analytical comparison, relative RS figures must
also be considered. RS component had only limited influ-
ence over general development in the wood construction
industry, the wood-based packaging industry and the mis-
cellaneous wood products industry in both eastern and
western Germany. However, higher values are found in
eastern Germany’s sawmill industry (?30%) and wood-
based panel industry (?89%). In other words, for the
industries under study, RS component impacted the general
development of employment more positively in eastern
Germany.
Discussion
The purpose of this time series research was to investigate
employment change in selected wood-based industries of
the German forest cluster between 1999 and 2006. The
results reveal a disproportional decrease in wood-based
employment, compared to both the producing industries
and the German economy as a whole over the observed
time period. The immense continual loss of employees over
the period affected all investigated industries except the
wood-based packaging industry, which contradicts the
overall trend of job loss in Germany’s wood manufactur-
ing. This competitive advantage can be attributed to
increasing German exports of goods particularly machin-
ery, which is mainly supplied in traditional wooden
packaging.
The research figures out that development of employ-
ment varied in the industries under study among the
German federal states, and sizeable differences indicated
the existence of regional disparities. In some industries
(sawmill industry, wood-based panel industry, wood-based
packaging industry), results provide a clear picture of
opposing development patterns in eastern versus western
Wood construction Wood-based Miscellaneous wood
(NACE 20.3) packaging products (NACE 20.5)
(NACE 20.4)
Absolute Relative Absolute Relative Absolute Relative
561 0.8 -71 -0.8 -276 -1.2
-407 -4.3 61 4.6 226 4.4
Germany, illustrated by certain federal states notably in
eastern Germany achieving positive employment growth.
In addition to overall employment changes, a shift-share
analysis was applied to differentiate specific regional
tendencies from general economic and industrial develop-
ments. By detecting divergent trends among the regions
under study, the method turned out to be a valuable ana-
lytical tool for exposing and targeting regional trends of
wood-based industries in the forest cluster that are deve-
loping independent from and opposed to overall economic
trends.
The study identified positive wood-based employment
trends particularly in eastern German states. A category of
federal states was identified that is characterised by RS
components exceeding the relative employment change,
suggesting that positive development in these federal states
was primarily a function of regional conditions. The federal
states of Mecklenburg-Western Pomerania and Thuringia
belong to this category in the context of their sawmill
industry. In the case of the wood-based packaging industry,
the states of Brandenburg, Mecklenburg-Western Pomera-
nia, Saxonia, Saxony-Anhalt and Thuringia exhibited such
positive regionally-induced development. It is notable that
all of these federal states are located in eastern Germany
and accounted for the resultant employment growth effects
in these industries.
Blien et al. (2006) identified comparative regional
labour markets in Germany and showed that eastern Ger-
many is mainly characterised by areas with high
unemployment rates and even the poorest labour market
conditions. In contrast, federal states in southern Germany
(such as Bavaria and Baden-Wuerttemberg) are character-
ised by good to the best labour market situations. Absolute
employment trends (Table 1) also reveal that the overall
negative employment trend in the national economy was
weaker in western Germany than eastern Germany. In fact,
the identified federal states in eastern Germany showing
positive regional trends in wood-based employment are
characterised by predominantly negative structural factors,
such as poor labour market conditions, high migration
rates, unqualified and absent human resources or weak
geographical proximity (Amend and Bogai 2005).
123
 Eur J Forest Res

The shift-share method allows for identifying regions Table 6 Subsidies (million euros per year) of the German Federal
(federal states) that reveal locational advantages. The RS Republic between 1997 and 2006 (Bundesministerium der Finanzen
2007, 2006, 2003, 2001, 1999)
component suggests only a presence or absence of loca-
tional advantages, but cannot identify them. Advantages Year Regional financial grants Subsidies for
(or disadvantages) of regions for example can be natural for investmenta industry totalb
endowments, the geographical position, advantageous Western Germany Eastern Germany
transport routes, effects of national and regional policy,
1997 136.7 928.7 7,176
entrepreneurial abilities, labour market conditions or other
1998 93.3 913.6 6,937
comparative advantages (Dinc et al. 1998). In the following
1999 99.9 898.7 6,544
we discuss several potential factors impacting on the
development of employment, which are considered to be 2000 95.6 800.1 5,934
plausible arguments for our results, yet we highlight the 2001 110.7 744.3 5,742
speculative nature of these explanations with regard to a 2002 96.1 587.7 4,779
lacking evidence for direct causal relationships. 2003 90.2 541.1 4,210
When considering the factor of natural endowments, it 2004 65.1 529.1 3,661
could be assumed that higher forest cover shares or lower 2005 500.2 3,263
urban area shares in a region entail a stronger presence of 2006 509.5 3,149
wood-based industries owing to the larger contingent of a
Gemeinschaftsaufgabe zur Verbesserung der regionalen
wood resources. Higher investment shares in new plants in Wirtschaftsstruktur
b
a region should induce an increase of employees. Yet for Finanzhilfen des Bundes für die Gewerbliche Wirtschaft (ohne
example in Mecklenburg-Western Pomerania, where Verkehr)
wood-based employment increased stronger than in any
other federal state of Germany (Table 3), forest cover is identified for the German Federal Republic between 1997
lower than in many other federal states (Table 1). Although and 2006 (Table 6). Among a total of subsidies of 113,000
forest cover and urban area values vary across the federal million euros in 1997 for a variety of subsidised targets,
states, the average is approximately equal for eastern and 62% account for subsidies for industry investments. These
western Germany. Therefore it is unlikely that differences subsidies were reduced from 71,000 million euros in 1997
in employment trends between eastern and western Ger- to 31,000 million euros in 2006. Subsidies for the
many (Table 3) can be attributed to this factor. ‘‘improvement of regional economic structure’’ (Ge-
Our results suggest that the observed regional advanta- meinschaftsaufgabe zur Verbesserung der regionalen
ges (at least in part) are an outcome of German post- Wirtschaftsstruktur) demonstrate decisive distinctions
reunification policy on subsidising federal states in eastern between eastern and western Germany. These non-repay-
Germany. Since the 1990s, all German federal states have able subsidies were granted to enterprises that invest in
had access to financial assistance from the federal gov- producing goods predominantly for supra-regional sale.
ernment, which targeted a stimulation of economic activity Although the amount’s share to wood-based branches
and employment. Numerous business enterprises made use cannot be determined, the total amount reveals that eastern
of these subsidies to invest in eastern Germany and/or Germany gained much more subsidies than western
transfer their production from western Germany to the Germany (in 1999 it was about ninefold).
federal states of eastern Germany (Eickelpasch and Pfeiffer Suedekum et al. (2006) have found that a higher share of
2006; Blien et al. 2001). It is known that a number of large- medium-sized firms induces stronger employment growth
scale wood-based enterprises were subsidised to start new in the region. In western Germany many small-scale saw-
businesses in several eastern federal states (e.g. Ministeri- milling enterprises (annual cut less than 50 T fm/a), which
um für Wirtschaft, Arbeit und Tourismus Mecklenburg- are important contributors to regional employment in rural
Vorpommern 2006; Holz-Zentralblatt 2004), yet the areas, have terminated their business activities during the
amount of these subsidies is confidential and cannot be last decade. Considerable losses in Germany’s small-scale
determined. sawmills of up to 28% have been documented between
A statistical correlation analysis between employment 1995 and 2001. This development is mainly determined
growth and the amount of subsidies cannot be tested due to through a strong competition from new large-scale saw-
unavailable data. Detailed information about subsidies is mills (annual cut more than 500 T fm/a) with modernised
subject to privacy laws by the federal government. How- and less labour-intense technology (Sörgel and Mantau
ever, even if relevant data are not available, the following 2006; Tesch et al. 2004; Schulte 2003b).
can be at least determined. Subsidies for industry invest- Our study confirms that notably eastern Germany
ments in general or with a particular regional focus can be experienced a positive employment growth in sawmill and

123
Eur J Forest Res
wood-based panel industry attributed to the development of
new enterprises. Subsidised new investments in eastern
Germany’s wood industry have most often been realised by
larger businesses that founded new large-scale, techno-
logically highly developed processing plants. These results
are consistent with Krätke and Scheuplein’s (2001) case
study of wood-based branches in the federal state of
Brandenburg, which found a dual structure of wood-based
industries in eastern Germany characterised by a few large
enterprises (often owned by West German proprietors)
versus many traditional small-scale enterprises. These
authors emphasise the problems of low own capital, low
capacity for innovation and high adjustment pressure on
small-scale enterprises. Although this ongoing structural
and technological change in the wood processing and
manufacturing industries may be attributed to an overall
trend in an increasingly globalised market economy
(Sowlati and Vahid 2006; Lebedys 2004), it remains very
questionable, whether such investments in high-tech, less
labour-intense large plants are rightfully co-financed by
federal subsidies that are mainly targeted at the reduction
of unemployment.
Regional labour costs, defined as the total expenditure
borne by employers in order to employ workers, can be an
important factor for regional disparities in employment
growth. An overly high regional wage level significantly
reduces employment growth especially in manufacturing
industries, because enterprises keeping pace with the
technological progress (automatisation) replace employees
by machines if wages and labour costs increase (Suedekum
et al. 2006; Suedekum and Blien 2004; Blien et al. 2003).
Labour costs in both the wood-based industries and the
producing industries were considerably higher in western
Germany than in eastern Germany (Table 7). In 2004,
wood industry employers (NACE 20) had to pay averagely
28,100 euros per employee per year in eastern Germany,
which was about 72% of labour costs in western Germany
(averagely 39,300 euros per year). These figures suggest
that imbalanced labour costs in eastern and western Ger-
many may be strongly influenced by regional employment
differences.
Land values are a further important factor affecting
investment decisions in target regions. Average land values
Table 7 Labour costs (euros per year) of the wood industry (NACE
20) and the producing industries (NACE C–F) in eastern and western
Germany in 2004 (Statistisches Bundesamt Deutschland 2007)
Wood industry Producing industries
(NACE 20) (NACE C–F)
Eastern Germany 28,120 34,108
Western Germany 39,296 51,954
Germany total 37,325 49,770
amounted 105 euros/m2 in western Germany and 29 euros/
m2 in eastern Germany in 2006 (Statistisches Bundesamt
Deutschland 2008). This large difference should have been
a further motivation for entrepreneurs to invest in eastern
Germany.
Blien et al. (2001) demonstrated for Germany that a
region’s geographical location can strongly influence its
development of employment. Regions in close proximity of
the Baltic Sea for example profited from better infrastruc-
ture and market opportunities, which also relates to the
wood industry. A special locational advantage represents
the seaport in Wismar (Mecklenburg-Western Pomerania),
which is a specialised import and export hub including
many goods of wood. North–south traffic between Central
Europe and Scandinavia, the Baltic States and Russia are
bundled and distributed here. Furthermore, (re-)buildings
of the regional highway network (Autobahn) in eastern
Germany during the 1990s were an important step to
connect far-off regions to markets in western Germany
(Ministerium für Wirtschaft, Arbeit und Tourismus
Mecklenburg-Vorpommern 2005, 2006).
Conclusion
In this study, divergent employment trends in wood-based
industries of the forest cluster have been studied for the
first time for Germany as a whole as well as its individual
federal states. The research depicts a massive ongoing
structural change in wood-based industries contrasting in
eastern and western German states and diverging from
overall economic trends. Federal subsidies for industrial
investments, labour costs, land values and locational
advantages linked to infrastructural peculiarities are sug-
gested to be decisive factors of concern that are likely to
have caused the regionally contrasting employment trends.
Owing to data confidentiality, the impact of subsidies in
the wood industry lacks empirical evidence and can only be
inferred from the total amount of subsidies. Nevertheless,
considering the disproportionally stronger employment
losses in the wood industry, it can be concluded that during
the last decade federal subsidies could not stimulate overall
employment in these industries. If at all, they have led to a
relocation of wood-based employment from western to
eastern federal states resulting in a comparatively weak
growth in eastern German states, which could not
compensate for the rapid decline in western Germany.
Especially in view of these results from our research, which
must be seen in the context of a harsh ongoing structural
change and market competition in the wood processing
industries, the justification for financial support of large-
scale plants through federal tax-based subsidies loses its
legitimacy from a regional economic perspective.
123

As an alternative, the authors advocate the government-
supported introduction of a regional forest cluster man-
agement, which attempts a holistic approach for the whole
wood-based value added chain and fosters horizontal and
vertical cooperation of small and medium-sized enterprises
in a regional context. Experiences from other countries in
Europe, particularly Austria and Switzerland, have shown
that regional wood-based cluster initiatives can stimulate
innovative business potentials and stabilise or even reverse
negative employment trends in the wood industry (Denner
2007; Mrosek and Kies 2006; Sautter 2004; Raines 2002).
The study presents a first-hand empirical basis for fur-
ther research on factors influencing employment growth
and decline in the forest cluster. An analysis of these
employment trends in lower level geographical units such
as functional planning regions (Bundesraumordnungsre-
gionen) would add to a more detailed understanding of the
dynamics within the federal states. Also the larger context
of employment shifts among countries in the European
Union is of strong interest to forest sector research. Fur-
thermore other industries such as pulp and paper or
furniture are candidates for future investigations. Con-
cerning different industry branches, a potential analysis
should also consider models of co-agglomeration.
Acknowledgments The authors would like to thank staff members
of the Federal Employment Agency (Bundesagentur für Arbeit) for
helpful support in providing access to their statistical reporting sys-
tem. We also thank Ms. Denise Allen, University of British
Columbia, Sustainable Forest Management Research Group and Jörg
Gauerke for editing the manuscript. The research was funded by the
Ministry of Environmental Protection and Nature Conservation,
Agriculture and Consumer Protection of North Rhine-Westphalia
(Ministerium für Wirtschaft, Arbeit und Tourismus Mecklenburg-
Vorpommern 2005, 2006).
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