East German unemployment: the myth of the irrelevant labor market
This paper indicates that East Germany's unemployment problem originates primarily in the labor market, caused by the fast wage adjustment after German reunification. We model the resulting labor market "traps" in a search and matching framework, show that they are difficult to overcome, and provide empirical evidence. We argue that under these circumstances, demandside policies are effective mainly when they increase the economy's overall productivity and thereby help overcome the labor market traps.
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Volume (Year): 31 (2008)
Issue (Month): 1 (September)
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- Lechthaler, Wolfgang & Merkl, Christian & Snower, Dennis J., 2010.
"Monetary persistence and the labor market: A new perspective,"
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- Hunt, Jennifer, 2000. "Why Do People Still Live In East Germany?," CEPR Discussion Papers 2431, C.E.P.R. Discussion Papers.
- repec:zbw:ifwkwp:1309 is not listed on IDEAS
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- Burda, Michael C, 1993. "The Determinants of East-West German Migration: Some First Results," CEPR Discussion Papers 764, C.E.P.R. Discussion Papers.
- Michael C. Burda & Jennifer Hunt, 2001. "From Reunification to Economic Integration: Productivity and the Labor Market in Eastern Germany," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2), pages 1-92. Full references (including those not matched with items on IDEAS)
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