Fact of the Week: Industrial Espionage Reduced the Productivity Gap Between East and West Germany by 10.3 Percent

Source: Albrecht Glitz and Erik Meyersson, “Industrial Espionage and Productivity,” Working Paper 982, Barcelona Graduate School of Economics, 2017.

Commentary: By the end of the Cold War, West Germany’s productivity was 3.6 times larger than East Germany’s. Utilizing the complete set of industrial information provided to East Germany between 1970 and 1989 by informants in West Germany, researchers have estimated that East Germany’s productivity would have been 10.3 percent lower in 1989 without this espionage. This effect was much more pronounced in high-tech sectors like the electronics industry, which saw a 41 percent increase in productivity from industrial espionage. In fact, the study finds that espionage brought returns of over 500-to-1, with the €11 million program creating €5.8 billion in economic gains for East Germany.