Two decades after German reunification significant differences in GDP per capita between East and West Germany still exist. To a somewhat lesser extent, this also holds true for GDP per employee. While it is often argued that this to be due to the lower levels of input factors such as capital, labour and human capital, we show that differences in the level of total factor productivity account for most of the remaining gap between East and West Germany. We also show that marginal capital productivity – on average – in East Germany is on almost the same level as in West Germany. However, East Germany exhibits comparatively low levels of marginal productivity of labour and particularly low levels of human capital.