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The unification bonus (malus) in postwall Eastern Germany

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  • Beblo, Miriam
  • Collier, Irwin L.
  • Knaus, Thomas
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    Abstract

    This paper presents estimates of the unification bonus for East Germans over the period 1991 to 1998. The unification bonus is defined as the discounted value of the difference between a person?s actual income and his or her counterfactual real income stream forecast for a hypothetical continuation of economic life in a static GDR. The two main issues tackled in this study are the construction of valid deflators for a comparison of real incomes during the transition from a centralized to a market economy and the estimation of plausible counterfactual income streams. Our central result is that 19 percent of East Germans received a present value malus and so can be regarded as unification losers but that the aggregate bonus is ten times the size of the aggregate malus of the sample. --

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    Bibliographic Info

    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 01-29.

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    Date of creation: 2001
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    Handle: RePEc:zbw:zewdip:5384

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    Related research

    Keywords: Real income comparison; income distribution and mobility; economies in transition;

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    1. Collier, Irwin L, Jr, 1989. "The Measurement and Interpretation of Real Consumption and Purchasing Power Parity for a Quantity-Constrained Economy: The Case of East and West Germany," Economica, London School of Economics and Political Science, vol. 56(221), pages 109-20, February.
    2. Wolfgang Franz & Viktor Steiner, 2000. "Wages in the East German Transition Process: Facts and Explanations," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 241-269, 08.
    3. Hauser, Richard & Fabig, Holger, 1999. "Labor Earnings and Household Income Mobility in Reunified Germany: A Comparison of the Eastern and Western States," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(3), pages 303-24, September.
    4. Burkhauser, Richard V. & Smeeding, Timothy M. & Merz, Joachim, 1994. "Relative Inequality and Poverty in Germany and the United States Using Alternative Equivalence Scales," MPRA Paper 16295, University Library of Munich, Germany.
    5. Neary, J.P & Roberts, K.W.S, 1978. "The Theory of Household Behaviour under Rationing," The Warwick Economics Research Paper Series (TWERPS) 132, University of Warwick, Department of Economics.
    6. Markus M. Grabka & Birgit Otto, 2001. "Angleichung der Markteinkommen privater Haushalte zwischen Ost- und Westdeutschland nicht in Sicht," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 68(4), pages 51-56.
    7. Collier, Irwin L, Jr, 1986. "Effective Purchasing Power in a Quantity Constrained Economy: An Estimate for the German Democratic Republic," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 24-32, February.
    8. 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.
    9. 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.
    10. Steiner, Viktor & Puhani, Patrick A., 1996. "Die Entwicklung der Lohnstruktur im ostdeutschen Transformationsprozeß," ZEW Discussion Papers 96-03, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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