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Wage differentials between East and West Germany: are they related to the location or to the people?

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  • W. Smolny
  • M. Kirbach

Abstract

Despite rapid economic integration and massive help from the Federal Government, large wage differences between East and West Germany still persist. We ask whether those differences are related to disadvantageous locational conditions in East Germany or could be found in the characteristics of the people living there. This article analyses income adjustment of East-West migrants based on the German Socio-Economic Panel (GSOEP), 1990-2008. Because migrants earned their income in both East and West Germany, the effect of the location can be identified. The results indicate that the wage differences cannot be attributed to the people.

Suggested Citation

  • W. Smolny & M. Kirbach, 2011. "Wage differentials between East and West Germany: are they related to the location or to the people?," Applied Economics Letters, Taylor & Francis Journals, vol. 18(9), pages 873-879.
    • Handle: RePEc:taf:apeclt:v:18:y:2011:i:9:p:873-879
    DOI: 10.1080/13504851.2010.511990
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    References listed on IDEAS

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    1. Smolny, Werner, 2010. "Dynamic adjustment and long-run equilibria: Panel data estimates for the East German states," Economic Modelling, Elsevier, vol. 27(5), pages 1223-1229, September.
    2. Jennifer Hunt, 2001. "Post-Unification Wage Growth in East Germany," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 190-195, February.
    3. Snower, Dennis J. & Merkl, Christian, 2006. "The caring hand that cripples: The East German labor market after reunification (detailed version)," Kiel Working Papers 1263, Kiel Institute for the World Economy (IfW).
    4. Sinn, Hans-Werner, 2002. "Germany's Economic Unification: An Assessment after Ten Years," Review of International Economics, Wiley Blackwell, vol. 10(1), pages 113-128, February.
    5. Hans‐Werner Sinn, 2002. "Germany’s Economic Unification: An Assessment after Ten Years," Review of International Economics, Wiley Blackwell, vol. 10(1), pages 113-128, February.
    6. 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.
    7. Michiel Van Leuvensteijn & Ashok Parikh, 2002. "How different are the determinants of population versus labour migration in Germany?," Applied Economics Letters, Taylor & Francis Journals, vol. 9(11), pages 699-703.
    8. Jennifer Hunt, 2004. "Are migrants more skilled than non-migrants? Repeat, return, and same-employer migrants," Canadian Journal of Economics, Canadian Economics Association, vol. 37(4), pages 830-849, November.
    9. Michael C. Burda, 2006. "Factor Reallocation in Eastern Germany after Reunification," American Economic Review, American Economic Association, vol. 96(2), pages 368-374, May.
    10. Eichler, Martin & Lechner, Michael, 2002. "An evaluation of public employment programmes in the East German State of Sachsen-Anhalt," Labour Economics, Elsevier, vol. 9(2), pages 143-186, April.
    11. Burda, Michael C., 1993. "The determinants of East-West German migration: Some first results," European Economic Review, Elsevier, vol. 37(2-3), pages 452-461, April.
    12. Jennifer Hunt, 2006. "Staunching Emigration from East Germany: Age and the Determinants of Migration," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 1014-1037, September.
    13. Hans‐Werner Sinn, 2002. "Germany’s Economic Unification: An Assessment after Ten Years," Review of International Economics, Wiley Blackwell, vol. 10(1), pages 113-128, February.
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    Citations

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    Cited by:

    1. Schnabel Claus, 2016. "United, Yet Apart? A Note on Persistent Labour Market Differences between Western and Eastern Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(2), pages 157-179, March.
    2. Alina Sorgner & Michael Fritsch & Alexander Kritikos, 2017. "Do entrepreneurs really earn less?," Small Business Economics, Springer, vol. 49(2), pages 251-272, August.
    3. Jan Kluge & Michael Weber, 2015. "Decomposing the German East-West wage gap," ifo Working Paper Series 205, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    4. Nicole Gürtzgen & André Diegmann (né Nolte), 2020. "Does low‐pay persist across different regimes? Evidence from German Unification," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 28(3), pages 413-440, July.
    5. Petrunyk Inna & Pfeifer Christian, 2016. "Life Satisfaction in Germany After Reunification: Additional Insights on the Pattern of Convergence," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(2), pages 217-239, March.
    6. Smolny Werner, 2012. "Cyclical Adjustment, Capital-labor Substitution and Total Factor Productivity Convergence – East Germany After Unification," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 232(4), pages 445-459, August.
    7. repec:iab:iabdpa:202037 is not listed on IDEAS
    8. Ekaterina Selezneva & Philippe Van Kerm, 2013. "Inequality-Adjusted Gender Wage Differentials in Germany," SOEPpapers on Multidisciplinary Panel Data Research 579, DIW Berlin, The German Socio-Economic Panel (SOEP).
    9. Jan Kluge & Michael Weber, 2018. "Decomposing the German East–West wage gap," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 26(1), pages 91-125, January.
    10. Ekaterina Selezneva & Philippe Van Kerm, 2016. "A distribution-sensitive examination of the gender wage gap in Germany," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(1), pages 21-40, March.
    11. Emmler, Julian & Fitzenberger, Bernd, 2020. "The Role of Unemployment and Job Change When Estimating the Returns to Migration," IZA Discussion Papers 13740, Institute of Labor Economics (IZA).

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