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A Comparative Analysis of East and West German Labor Markets: Before and After Unification

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  • Alan Krueger
  • Jorn-Steffen Pischke

Abstract

In 1988, the wage distribution in East Germany was much more compressed than in West Germany or the U.S. Since the collapse of Communism and unification with West Germany, however, the wage structure in eastern Germany has changed considerably. In particular, wage variation has increased, the payoff to education has decreased somewhat, industry differentials have expanded, and the white collar premium has increased. Although average wage growth has been remarkably high in eastern Germany, individual variation in wage growth is similar to typical western levels. The wage structure of former East Germans who work in western Germany resembles the wage structure of native West Germans in some respects, but their experience-earnings profile is flat.

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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 686.

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Date of creation: Aug 1992
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Handle: RePEc:pri:indrel:dsp017p88cg546

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Keywords: Germany; transition; wages;

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References

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  1. Susan N. Houseman & Katharine G. Abraham, 1995. "Earnings Inequality in Germany," Book chapters authored by Upjohn Institute researchers, W.E. Upjohn Institute for Employment Research, in: Richard B. Freeman & Lawrence F. Katz (ed.), Differences and Changes in Wage Structures, pages 371-403 W.E. Upjohn Institute for Employment Research.
  2. Atkinson,Anthony Barnes & Micklewright,John, 1992. "Economic Transformation in Eastern Europe and the Distribution of Income," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521433297.
  3. Bergson, Abram, 1984. "Income Inequality under Soviet Socialism," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1052-99, September.
  4. John M. Abowd & David Card, 1986. "On the Covariance Structure of Earnings and Hours Changes," NBER Working Papers 1832, National Bureau of Economic Research, Inc.
  5. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
  6. Michael C. Burda & Jeffrey D. Sachs, 1988. "Assessing High Unemployment in West Germany," The World Economy, Wiley Blackwell, vol. 11(4), pages 543-563, December.
  7. Jean Helwege & Joachim Wagner, 1991. "More on the international similarity of interindustry wage differentials: evidence from the Federal Republic of Germany and the U.S," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 167, Board of Governors of the Federal Reserve System (U.S.).
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