Advanced Search
MyIDEAS: Login to save this paper or follow this series

20 Years of German Unification: Evidence on Income Convergence and Heterogeneity

Contents:

Author Info

  • Tilman Brück
  • Heiko Peters

Abstract

We analyse the convergence and heterogeneity of living standards between East and West Germany since unification. Based on data from the German Socio-Economic Panel (GSOEP), we compare total individual income of permanent adult residents, including retirees and the unemployed, of East and West Germany over the fifteen years for which data are available. Using a fixed effects vector decomposition method, we estimate the gross total income difference between East and West Germans taking unobserved heterogeneity into account. Our analysis demonstrates that the negative income gap has decreased from 33 per cent in 1992 to 22 per cent in 2002, rising again to 26 per cent in 2007. Hence some convergence took place in nominal terms since unification. Constructing income gaps by decennial cohorts, we discover that the most recent cohorts have the highest negative income gap. This probably reflects out-migration from East Germany by the young and highly skilled. On the basis of quantile regressions we find a positive income gap at the beginning of the 1990s for the lower income deciles (that is higher incomes in East Germany). This was due to retirees in the East with relative long employment histories receiving transfer payments by western standards. The income gap is insignificant when accounting for heterogeneity at the area level by including area level variables to our regression.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.342791.de/diw_sp0229.pdf
Download Restriction: no

Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 229.

as in new window
Length: 20 p.
Date of creation: 2009
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp229

Contact details of provider:
Postal: Mohrenstraße 58, D-10117 Berlin
Phone: xx49-30-89789-671
Fax: xx49-30-89789-109
Email:
Web page: http://www.diw.de/en/soep
More information through EDIRC

Related research

Keywords: Unification; living standards; income inequality; distribution; GSOEP; Germany;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Nicola Fuchs-Schuendeln & Dirk Krueger & Mathias Sommer, 2010. "Inequality Trends for Germany in the Last Two Decades: A Tale of Two Countries," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 103-132, January.
  2. Johannes Gernandt & Friedhelm Pfeiffer, 2007. "Rising Wage Inequality in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 227(4), pages 358-380, August.
  3. Karl Brenke, 2005. "Income Growth in German Households: East Germany Falls Behind," Weekly Report, DIW Berlin, German Institute for Economic Research, DIW Berlin, German Institute for Economic Research, vol. 1(15), pages 193-201.
  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.
  5. 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).
  6. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521845731.
  7. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2009. "Revisiting the German Wage Structure," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 124(2), pages 843-881, May.
  8. Michael Roos, 2006. "Earnings Disparities in Unified Germany: Nominal versus Real," Jahrbuch für Regionalwissenschaft, Springer, Springer, vol. 26(2), pages 171-189, October.
  9. Jan Goebel & Roland Habich & Peter Krause, 2009. "Zur Angleichung von Einkommen und Lebensqualität im vereinigten Deutschland," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, DIW Berlin, German Institute for Economic Research, vol. 78(2), pages 122-145.
  10. Steiner, Viktor & Wagner, Kersten, 1997. "East West German wage convergence - How far have we got?," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 97-25, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  11. Frank Heiland, 2004. "Trends in East-West German Migration from 1989 to 2002," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 11(7), pages 173-194, September.
  12. Gerlach, Knut & Stephan, Gesine, 1996. "A paper on unhappiness and unemployment in Germany," Economics Letters, Elsevier, Elsevier, vol. 52(3), pages 325-330, September.
  13. Michael C. Burda & Jennifer Hunt, 2001. "From Reunification to Economic Integration: Productivity and the Labor Market in Eastern Germany," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2), pages 1-92.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. 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.

Lists

This item is featured on the following reading lists or Wikipedia pages:
  1. SOEP based publications

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:diw:diwsop:diw_sp229. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.