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Firm wage differentiation in Eastern Germany A non‐parametric analysis of the wage spread

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  • Bernd Görzig
  • Martin Gornig
  • Axel Werwatz

Abstract

In Eastern Germany, wage differentiation between firms has clearly grown, parallel to individual wage differentials. Nevertheless, the wage spread between firms is still much less than in Western Germany. In this paper, a non‐parametric decomposition is used to analyze the difference between the wages spread in the two parts of Germany. Only part of the difference can be explained by different economic structures in Eastern Germany. By far, the greater part of the difference in the wage spread between firms in the two parts of the country is due to the fact that differences in wages paid by firms of the same type in Eastern Germany are much less than those of their counterparts in Western Germany. A striking result of the analysis is that the gap in the wage variance between Eastern and Western Germany is increasing.

Suggested Citation

  • Bernd Görzig & Martin Gornig & Axel Werwatz, 2008. "Firm wage differentiation in Eastern Germany A non‐parametric analysis of the wage spread," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(2), pages 273-292, April.
    • Handle: RePEc:bla:etrans:v:16:y:2008:i:2:p:273-292
    DOI: 10.1111/j.1468-0351.2008.00311.x
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    References listed on IDEAS

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    1. Pedro Martins, 2009. "Rent sharing before and after the wage bill," Applied Economics, Taylor & Francis Journals, vol. 41(17), pages 2133-2151.
    2. William T. Dickens & Lawrence F. Katz, 1987. "Inter-Industry Wage Differences and Theories of Wage Determination," NBER Working Papers 2271, National Bureau of Economic Research, Inc.
    3. Dennis J. Snower & Christian Merkl, 2006. "The Caring Hand that Cripples: The East German Labor Market after Reunification," American Economic Review, American Economic Association, vol. 96(2), pages 375-382, May.
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    Cited by:

    1. Orlowski, Robert & Riphahn, Regina T., 2008. "The East German Wage Structure after Transition," IZA Discussion Papers 3861, Institute of Labor Economics (IZA).
    2. Michael Gühne & Gunther Markwardt, 2014. "Lohnunterschiede zwischen Ost- und Westdeutschland: Neue Einsichten," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 21(03), pages 37-44, June.

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