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Explaining Eastern Germany's Wage Gap: The Impact of Structural Change

  • Bernd Gorzig
  • Martin Gornig
  • Axel Werwatz

Since Eastern Germany's conversion to a market economy wages have remained considerably below the West German wage level. This article looks at the role of establishment-specific factors—such as sectoral affiliation and size of the labour force—in this process. A non-parametric decomposition that has played a prominent role in the gender wage gap literature is applied to breakdown the East-West wage gap into its constituent components. Using establishment data from German employment statistics, the article demonstrates that the catching-up process of Eastern Germany's wage level is hindered by the shift in its economic structure towards lower-paying types of companies, which has caused the lagging behind in the adjustment of wages.

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Article provided by Taylor & Francis Journals in its journal Post-Communist Economies.

Volume (Year): 17 (2005)
Issue (Month): 4 ()
Pages: 449-464

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Handle: RePEc:taf:pocoec:v:17:y:2005:i:4:p:449-464
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