IDEAS home Printed from https://ideas.repec.org/a/taf/pocoec/v17y2005i4p449-464.html
   My bibliography  Save this article

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

Author

Listed:
  • Bernd Gorzig
  • Martin Gornig
  • Axel Werwatz

Abstract

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.

Suggested Citation

  • Bernd Gorzig & Martin Gornig & Axel Werwatz, 2005. "Explaining Eastern Germany's Wage Gap: The Impact of Structural Change," Post-Communist Economies, Taylor & Francis Journals, vol. 17(4), pages 449-464.
  • Handle: RePEc:taf:pocoec:v:17:y:2005:i:4:p:449-464 DOI: 10.1080/14631370500350744
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/14631370500350744
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Keen, Michael & Lahiri, Sajal, 1998. "The comparison between destination and origin principles under imperfect competition," Journal of International Economics, Elsevier, vol. 45(2), pages 323-350, August.
    2. Richard V. Burkhauser & Michaela Kreyenfeld & Gert G. Wagner, 1997. "The German Socio-Economic Panel: A Representative Sample of Reunited Germany and its Parts," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 66(1), pages 7-16.
    3. Hildreth, Andrew K G & Oswald, Andrew J, 1997. "Rent-Sharing and Wages: Evidence from Company and Establishment Panels," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 318-337, April.
    4. Walter Y. Oi & Todd L. Idson, 1999. "Workers Are More Productive in Large Firms," American Economic Review, American Economic Association, pages 104-108.
    5. Robert Gibbons & Lawrence Katz, 1992. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 515-535.
    6. Nickell, S & Vainiomaki, J & Wadhwani, S, 1994. "Wages and Product Market Power," Economica, London School of Economics and Political Science, vol. 61(244), pages 457-473, November.
    7. Hugo Ñopo, 2008. "Matching as a Tool to Decompose Wage Gaps," The Review of Economics and Statistics, MIT Press, pages 290-299.
    8. Hugo Ñopo, 2008. "Matching as a Tool to Decompose Wage Gaps," The Review of Economics and Statistics, MIT Press, pages 290-299.
    9. Kenneth R. Troske, 1999. "Evidence On The Employer Size-Wage Premium From Worker-Establishment Matched Data," The Review of Economics and Statistics, MIT Press, pages 15-26.
    10. repec:ces:ifodre:v:10:y:2003:i:05:p:s.27-35 is not listed on IDEAS
    11. 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.
    12. Margolis, D.N. & Salvanes, K.G., 2001. "Do Firms Really Share Rents with Their Workers?," Papers 11/2001, Norwegian School of Economics and Business Administration-.
    13. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, pages 251-334.
    14. F. Fakhfakh & F. Fitzroy, 2003. "Basic Wages and Firm Characteristics : Rent-sharing in French Manufacturing," Working Papers ERMES 0311, ERMES, University Paris 2.
    15. Michael C. Burda, 1991. "Some New Insights on the Interindustry Wage Structure from the German Socio-Economic Panel," Discussion Papers of DIW Berlin 30, DIW Berlin, German Institute for Economic Research.
    16. David Blanchflower & Stephen Machin, 1996. "Product Market Competition Wages and Productivity: International Evidence from Establishment-Level Data," Annals of Economics and Statistics, GENES, pages 219-253.
    17. Beate Grundig & Carsten Pohl, 2003. "Interindustrielle Lohndifferenzierung in Zentraleuropa," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 56(24), pages 9-15, December.
    18. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1996. "Wages, Profits, and Rent-Sharing," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 227-251.
    19. Josef Zweimuller & Rudolf Winter-Ebmer, 1999. "Firm-Size Wage Differentials in Switzerland: Evidence from Job-Changers," American Economic Review, American Economic Association, pages 89-93.
    20. repec:hal:journl:halshs-00369141 is not listed on IDEAS
    21. Josef Zweimuller & Rudolf Winter-Ebmer, 1999. "Firm-Size Wage Differentials in Switzerland: Evidence from Job-Changers," American Economic Review, American Economic Association, vol. 89(2), pages 89-93, May.
    22. Green, Francis & Machin, Stephen & Manning, Alan, 1996. "The Employer Size-Wage Effect: Can Dynamic Monopsony Provide an Explanation?," Oxford Economic Papers, Oxford University Press, vol. 48(3), pages 433-455, July.
    23. Fathi Fakhfakh & Felix FitzRoy, 2004. "Basic Wages and Firm Characteristics: Rent Sharing in French Manufacturing," LABOUR, CEIS, vol. 18(4), pages 615-631, December.
    24. Goux, Dominique & Maurin, Eric, 1999. "Persistence of Interindustry Wage Differentials: A Reexamination Using Matched Worker-Firm Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 492-533, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rycx, Francois & Saks, Yves & Tojerow, Ilan, 2016. "Misalignment of Productivity and Wages across Regions? Evidence from Belgian Matched Panel Data," IZA Discussion Papers 10336, Institute for the Study of Labor (IZA).
    2. Arne Uhlendorff, 2006. "From No Pay to Low Pay and Back Again?: A Multi-State Model of Low Pay Dynamics," Discussion Papers of DIW Berlin 648, DIW Berlin, German Institute for Economic Research.
    3. Görzig Bernd & Gornig Martin & Werwatz Axel, 2007. "Produktdiversifizierung: Konvergenz zwischen ost- und westdeutschen Unternehmen / Product Diversification: Have East-German Enterprises Caught-Up with the West?: Eine Dekomposition mit Mikrodaten der ," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 227(2), pages 168-186, April.
    4. Michael Weber & Jan Kluge, 2015. "Decomposing the German East-West wage gap," ERSA conference papers ersa15p636, European Regional Science Association.
    5. Bachmann, Ronald & Bauer, Thomas K. & Kröger, Hanna & Schaffner, Sandra & Schmidt, Christoph M., 2012. "Tarifsystem stabilisieren: Drucksache 17/8148. Stellungnahme zur Anhörung des Ausschusses für Arbeit und Soziales des Deutschen Bundestages am 6. Februar 2012," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 72592.
    6. Jens Holscher & Cristiano Perugini & Fabrizio Pompei, 2011. "Wage inequality, labour market flexibility and duality in Eastern and Western Europe," Post-Communist Economies, Taylor & Francis Journals, pages 271-310.
    7. Juan Carlos Martinez Oliva, 2009. "Riunificazione intertedesca e politiche per la convergenza," Mo.Fi.R. Working Papers 14, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    8. 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.
    9. Bernd Görzig & Martin Gornig & Axel Werwatz, 2007. "Produktvielfalt und Produktivität der IKT-Produzenten:Eine Analyse unter Nutzung verbundener amtlicher Unternehmensdaten," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer;Deutsche Statistische Gesellschaft - German Statistical Society, vol. 1(2), pages 145-161, October.
    10. repec:jns:jbstat:v:227:y:2007:i:2:p:168-186 is not listed on IDEAS
    11. Michael Weber & Jan Kluge, 2015. "Decomposing the German East-West wage gap," ERSA conference papers ersa15p636, European Regional Science Association.
    12. Bernd Görzig & Martin Gornig & Laurence Nayman, 2012. "Productivity Transitions in Large Mature Economies: France, Germany and the UK," Chapters,in: Industrial Productivity in Europe, chapter 4 Edward Elgar Publishing.
    13. Stephani, Jens, 2013. "Does it matter where you work? : employer characteristics and the wage growth of low-wage workers and higher-wage workers," IAB Discussion Paper 201304, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    14. Bachmann, Ronald & Bauer, Thomas K. & Kröger, Hanna & Schaffner, Sandra & Schmidt, Christoph M., 2012. "Tarifvertragssystem stärken - Allgemeinverbindliche Tariflöhne und branchenspezifische Mindestlöhne erleichtern. Stellungnahme zur Anhörung des Ausschusses für Arbeit und Soziales des Deutschen Bundes," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 72615.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:pocoec:v:17:y:2005:i:4:p:449-464. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/CPCE20 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.