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Minimum Wages and Employment: The Case of German Unification

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  • Bernhard Heitger
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    Abstract

    Analysis in terms of the two-sector open economy shows that in bringing the market economy to East Germany, West Germany seems to have disregarded important fundamentals. Premature formation of a currency union led to a substantial real appreciation of the East German currency. Premature implementation of the West German system of wage bargaining resulted in inappropriate minimum wage schedules. Both measures made East German production possibilities and employment decline.

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    File URL: https://www.ifw-members.ifw-kiel.de/publications/minimum-wages-and-employment-the-case-of-german-unification/kap1045.pdf
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    Bibliographic Info

    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1045.

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    Length: 23 pages
    Date of creation: May 2001
    Date of revision:
    Handle: RePEc:kie:kieliw:1045

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    Keywords: Minimum Wages; Employment; German Unification;

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    1. Brecher, Richard A, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 98-116, February.
    2. Marcus Noland & Sherman Robinson & Li-Gang Liu, 1997. "The Economics of Korean Unification," Working Paper Series WP97-5, Peterson Institute for International Economics.
    3. Rudiger Dornbusch & Holger C. Wolf, 1993. "East German Economic Reconstruction," Working Papers 93-22, New York University, Leonard N. Stern School of Business, Department of Economics.
    4. Dornbusch, Rudiger, 1993. "The End of the German Miracle," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 881-85, June.
    5. Gerlinde Sinn & Hans-Werner Sinn, 1994. "Jumpstart: The Economic Unification of Germany," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691728, December.
    6. Hans-Werner Sinn, 1995. "Staggering along: wages policy and investment support in East Germany," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 3(4), pages 403-426, December.
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