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Does low‐pay persist across different regimes? Evidence from German Unification

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  • Nicole Gürtzgen
  • André Diegmann (né Nolte)

Abstract

Using German administrative data, we study across‐regime low‐pay persistence in the context of an economic transformation process. We first show that individuals' initial allocation to the post‐unification low‐wage sector was close to random in terms of market‐regime unobservables. Consistent with a weak connection between individuals' true productivity and their pre‐unification low‐wage status, the extent of across‐regime state dependence is found to be small and appears to vanish over time. For males, across‐regime state dependence is most pronounced among the medium‐ and high‐skilled, suggesting the depreciation of human capital as an explanation.

Suggested Citation

  • 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.
  • Handle: RePEc:wly:ectrin:v:28:y:2020:i:3:p:413-440
    DOI: 10.1111/ecot.12244
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