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Why Do People Still Live in East Germany?

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Jennifer Hunt

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Abstract

In 1997 GDP per capita in East Germany was 57% of that of West Germany, wage rates were 75% of western levels, and the unemployment rate was at least double the western rate of 7.8%. One would expect that if capital flows and trade in goods failed to bring convergence, labor flows would respond, enhancing overall efficiency. Yet net emigration from East Germany has fallen from high levels in 1989-1990 to close to zero. Using state-level data for all of Germany, available from 1991-1996, I am able to explain the downward trend in east to west migration using wage and unemployment information. Convergence in hourly wages is the most important factor. Analysis of the eastern sample of the German Socio-Economic Panel for 1990-1997 suggests that commuting is unlikely to substitute substantially for emigration. The individual-level data further indicate that emigrants are disproportionately young and skilled, and that individuals suffering a layoff or non-employment spell are also much more likely to emigrate.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.38526.de/dp201.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 201.

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Length: 33 p.
Date of creation: 2000
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Handle: RePEc:diw:diwwpp:dp201

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  5. Hunt, Jennifer, 1999. "Post-Unification Wage Growth in East Germany," CEPR Discussion Papers 2106, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. George J. Borjas, 1988. "Self-Selection and the Earnings of Immigrants," NBER Working Papers 2248, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Decressin, Jorg & Fatas, Antonio, 1995. "Regional labor market dynamics in Europe," European Economic Review, Elsevier, vol. 39(9), pages 1627-1655, December. [Downloadable!] (restricted)
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  13. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1992-1), pages 1-76. [Downloadable!]
  14. Daveri, Francesco & Faini, Riccardo, 1996. "Where do Migrants Go? Risk-Aversion, Mobility Costs and the Locational Choice of Migrants," CEPR Discussion Papers 1540, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  15. George J. Borjas & Stephen G. Bronars & Stephen J. Trejo, 1992. "Self-Selection and Internal Migration in the United States," NBER Working Papers 4002, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Jackman, Richard & Savouri, Savvas, 1992. "Regional Migration in Britain: An Analysis of Gross Flows Using NHS Central Register Data," Economic Journal, Royal Economic Society, vol. 102(415), pages 1433-50, November. [Downloadable!] (restricted)
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  18. Pissarides, Christopher A & Wadsworth, Jonathan, 1989. "Unemployment and the Inter-regional Mobility of Labour," Economic Journal, Royal Economic Society, vol. 99(397), pages 739-55, September. [Downloadable!] (restricted)
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