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Wage Convergence and Inequality after Unification: (East) Germany in Transition

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  • Johannes Gernandt
  • Friedhelm Pfeiffer

Abstract

This paper investigates the wage convergence between East German workers and their West German counterparts after reunification. Our research is based on a comparison of three groups of workers defined as stayers, migrants and commuters to West Germany, who lived in East Germany in 1989, with groups of West German statistical twin workers, all taken from the Socio-Economic Panel (SOEP). According to our findings, wage convergence for stayers is roughly 75 percent and for commuters 85 percent. Wages of migrants to West Germany equal the ones of their West German statistical twins. We conclude that labor markets in East and West Germany are still characterized by wage differences but that the degree of inequality in both regions converged.

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Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 107.

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Length: 20 p.
Date of creation: 2008
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp107

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Keywords: Wage convergence; wage inequality; German unification; migration; commuting;

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References

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  1. Paul Krugman, 1994. "Past and prospective causes of high unemployment," Economic Review, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, issue Q IV, pages 23-43.
  2. Edward J. Bird & Johannes Schwarze & Gert Wagner, 1994. "Wage effects of the move toward free markets in East Germany," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, ILR Review, Cornell University, ILR School, vol. 47(3), pages 390-400, April.
  3. Herbert Brücker & Parvati Trübswetter, 2004. "Do the Best Go West?: An Analysis of the Self-Selection of Employed East-West Migrants in Germany," Discussion Papers of DIW Berlin 396, DIW Berlin, German Institute for Economic Research.
  4. Franz, Wolfgang & Steiner, Viktor, 1999. "Wages in the East German transition process: facts and explanations," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 99-40, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  9. Johannes Gernandt & Friedhelm Pfeiffer, 2007. "Rising Wage Inequality in Germany," SOEPpapers on Multidisciplinary Panel Data Research, DIW Berlin, The German Socio-Economic Panel (SOEP) 14, DIW Berlin, The German Socio-Economic Panel (SOEP).
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Citations

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Cited by:
  1. Brück, Tilman & Peters, Heiko, 2009. "20 years of German unification: Evidence on income convergence and heterogeneity," Working Papers, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung 03/2009, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
  2. Terry Gregory & Melanie Arntz & Florian Lehmer, 2011. "Unequal Pay or Unequal Employment? What Drives the Self-Selection of Internal Migrants in Germany?," ERSA conference papers ersa11p972, European Regional Science Association.
  3. Usamah Fayez Al-Farhan, 2010. "Changes in the Gender Wage Gap in Germany during a Period of Rising Wage Inequality 1999-2006: Was it Discrimination in the Returns to Human Capital?," SOEPpapers on Multidisciplinary Panel Data Research, DIW Berlin, The German Socio-Economic Panel (SOEP) 293, DIW Berlin, The German Socio-Economic Panel (SOEP).
  4. Kohn, Karsten & Antonczyk, Dirk, 2011. "The Aftermath of Reunification: Sectoral Transition, Gender, and Rising Wage Inequality in East Germany," IZA Discussion Papers 5708, Institute for the Study of Labor (IZA).
  5. Arntz, Melanie & Gregory, Terry & Lehmer, Florian, 2012. "Unequal Pay or Unequal Employment? What Drives the Skill-Composition of Labor Flows in Germany?," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century, Verein für Socialpolitik / German Economic Association 62309, Verein für Socialpolitik / German Economic Association.
  6. Karsten Kohn & Dirk Antonczyk, 2013. "The aftermath of reunification," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 21(1), pages 73-110, 01.

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