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Wage effects of the move toward free markets in East Germany

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Author Info
Edward J. Bird
Johannes Schwarze
Gert Wagner

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Abstract

This analysis of data from the German Socio-Economic Panel (SOEP) for the years 1989-91 illuminates important changes in the structure of wages that were occurring in the former East Germany during its transition toward a capitalist economy-and changes that are probably occurring in other countries in Eastern Europe as well. Under the new capitalist wage regime, workers realized significant returns to schooling gained under socialism, but no significant returns to work experience. Because work experience is the largest element in the human capital of older workers, their wages fell under the new system; and the results suggest that their wages will continue to fall relative to those of younger workers. Generous transfer payments from western Germany may prevent an absolute decline in living standards of these workers. Older workers in other eastern countries, however, will have no such social assistance, and their living standards will probably fall. (Abstract courtesy JSTOR.)

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Publisher Info
Article provided by ILR Review, ILR School, Cornell University in its journal ILR Review.

Volume (Year): 47 (1994)
Issue (Month): 3 (April)
Pages: 390-400
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Handle: RePEc:ilr:articl:v:47:y:1994:i:3:p:390-400

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  10. Ira N. Gang & Robert C. Stuart & Myeong-Su Yun, 2006. "Wage Growth and Inequality Change During Rapid Economic Transition," Departmental Working Papers 200631, Rutgers University, Department of Economics. [Downloadable!]
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  12. Franz, Wolfgang & Steiner, Viktor, 1999. "Wages in the East German transition process : facts and explanations," ZEW Discussion Papers 99-40, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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  14. Noorkoiv, Rivo & Orazem, Peter F. & Puur, Allan & Vodopivec, Milan, 1997. "How Estonia's economic transition affected employment and wages (1989-95)," Policy Research Working Paper Series 1837, The World Bank. [Downloadable!]
  15. Puhani, Patrick A., 1997. "All Quiet on the Wage Front?," ZEW Discussion Papers 97-03, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  16. Steiner, Viktor & Wagner, Kersten, 1997. "East West German wage convergence - How far have we got?," ZEW Discussion Papers 97-25, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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