Getting Behind the East-West [German] Wage Differential: Theory and Evidence
AbstractLabor markets are the most important mediator of German unification and wages are a central indicator of its progress. Starting from the observation that a wage differential between two workers can arise either because workers have different endowments of human capital characteristics or remuneration to these characteristics differ, we apply an Oaxaca-style decomposition to the post-unification waves of the GSOEP to analyze the extent and causes of the East-West German wage differential. We derive an empirical specification allowing us to assess directly whether (i) the initial wage disadvantage of East German workers is increasing in "age at unification" and (ii) subsequent wage growth is increasing in the time remaining in the labor force. Furthermore, we derive and estimate a measure of East-West wage convergence that accounts for both differences in human capital endowments and interference generated by the aging process.
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Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 105.
Date of creation: 01 May 1997
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German unification; wage differentials; convergence;
Find related papers by JEL classification:
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-04-03 (All new papers)
- NEP-IFN-2002-04-03 (International Finance)
- NEP-LTV-2002-04-03 (Unemployment, Inequality & Poverty)
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