Authors: Albrecht Glitz and Eric Meyersson
American Economic Review, Vol. 110, No 4, 1055-1103, April, 2020In this paper, we investigate the economic returns to industrial espionage. We show that the flow of information provided by East German informants in the West over the period 1970-1989 led to a significant narrowing of sectoral TFP gaps between West and East Germany. These economic returns were primarily driven by relatively few high-quality pieces of information and particularly large in sectors closer to the West German technological frontier. Our findings suggest that the East-to-West German TFP ratio would have been 13.3 percent lower at the end of the Cold War had East Germany not engaged in industrial espionage in the West.