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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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    Cited by:

    1. Ekaterina Selezneva & Philippe Van Kerm, 2013. "Inequality-adjusted gender wage differentials in Germany," Working Papers 334, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    2. 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.
    3. Hirsch, Boris & Merkl, Christian & Müller, Steffen & Schnabel, Claus, 2014. "Centralized vs. Decentralized Wage Formation: The Role of Firms' Production Technology," IZA Discussion Papers 8242, Institute for the Study of Labor (IZA).
    4. 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, pages 21-40.
    5. Alina Sorgner & Michael Fritsch & Alexander Kritikos, 2017. "Do entrepreneurs really earn less?," Small Business Economics, Springer, vol. 49(2), pages 251-272, August.
    6. 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.
    7. 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.
    8. 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.

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