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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.

Suggested Citation

  • Johannes Gernandt & Friedhelm Pfeiffer, 2008. "Wage Convergence and Inequality after Unification: (East) Germany in Transition," SOEPpapers on Multidisciplinary Panel Data Research 107, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp107
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    Cited by:

    1. Anja Vatterrott, 2015. "Socialisation or Institutional Context: What Determines the First and Second Birth Behaviour of East–West German Migrants?," European Journal of Population, Springer;European Association for Population Studies, vol. 31(4), pages 383-415, October.
    2. Arntz, Melanie & Gregory, Terry & Lehmer, Florian, 2011. "Unequal pay or unequal employment? What drives the skill-composition of labor flows in Germany?," ZEW Discussion Papers 11-074, ZEW - Leibniz Centre for European Economic Research.
    3. Orlowski, Robert & Riphahn, Regina T., 2008. "The East German Wage Structure after Transition," IZA Discussion Papers 3861, Institute of Labor Economics (IZA).
    4. Schnabel Claus, 2016. "United, Yet Apart? A Note on Persistent Labour Market Differences between Western and Eastern Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(2), pages 157-179, March.
    5. Karsten Kohn & Dirk Antonczyk, 2013. "The aftermath of reunification," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 21(1), pages 73-110, January.
    6. 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.
    7. Julia Bredtmann, 2014. "The Intra-household Division of Labor: An Empirical Analysis of Spousal Influences on Individual Time Allocation," LABOUR, CEIS, vol. 28(1), pages 1-39, 03.
    8. repec:zbw:rwirep:0200 is not listed on IDEAS
    9. Brück, Tilman & Peters, Heiko, 2009. "20 Years of German Unification: Evidence on Income Convergence and Heterogeneity," IZA Discussion Papers 4454, Institute of Labor Economics (IZA).
    10. Anja Vatterrott, 2011. "The fertility behaviour of East to West German migrants," MPIDR Working Papers WP-2011-013, Max Planck Institute for Demographic Research, Rostock, Germany.
    11. Jan Kluge & Michael Weber, 2015. "Decomposing the German East-West wage gap," ifo Working Paper Series 205, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    12. Kohn, Karsten & Antonczyk, Dirk, 2011. "The Aftermath of Reunification: Sectoral Transition, Gender, and Rising Wage Inequality in East Germany," IZA Discussion Papers 5708, Institute of Labor Economics (IZA).
    13. Coban, Mustafa, 2017. "Wage mobility, wage inequality, and tasks: Empirical evidence from Germany, 1984-2014," Discussion Paper Series 139, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    14. Ralf Werner Koßmann, 2016. "Effectiveness of Social Capital in the Job Search Process," SOEPpapers on Multidisciplinary Panel Data Research 823, DIW Berlin, The German Socio-Economic Panel (SOEP).
    15. 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 293, DIW Berlin, The German Socio-Economic Panel (SOEP).
    16. Jan Kluge & Michael Weber, 2018. "Decomposing the German East–West wage gap," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 26(1), pages 91-125, January.

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    More about this item

    Keywords

    Wage convergence; wage inequality; German unification; migration; commuting;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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