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Why Do People Still Live in East Germany?

  • Jennifer Hunt

In 1997 GDP per capita in East Germany was 57% of that of West Germany, wage rates were 75% of western levels, and the unemployment rate was at least double the western rate of 7.8%. One would expect that if capital flows and trade in goods failed to bring convergence, labor flows would respond, enhancing overall efficiency. Yet net emigration from East Germany has fallen from high levels in 1989-1990 to close to zero. Using state-level data for all of Germany, available from 1991-1996, I am able to explain the downward trend in east to west migration using wage and unemployment information. Convergence in hourly wages is the most important factor. Analysis of the eastern sample of the German Socio-Economic Panel for 1990-1997 suggests that commuting is unlikely to substitute substantially for emigration. The individual-level data further indicate that emigrants are disproportionately young and skilled, and that individuals suffering a layoff or non-employment spell are also much more likely to emigrate.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.38526.de/dp201.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 201.

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Length: 33 p.
Date of creation: 2000
Date of revision:
Handle: RePEc:diw:diwwpp:dp201
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  1. Jörg Decressin, 1994. "Internal migration in West Germany and implications for East-West salary convergence," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(2), pages 231-257, June.
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  15. Richard B. Freeman, 1982. "Crime and the Labor Market," NBER Working Papers 1031, National Bureau of Economic Research, Inc.
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  17. Daveri, Francesco & Faini, Riccardo, 1996. "Where do Migrants Go? Risk-Aversion, Mobility Costs and the Locational Choice of Migrants," CEPR Discussion Papers 1540, C.E.P.R. Discussion Papers.
  18. Chiara Bentivogli & Patrizio Pagano, 1999. "Regional Disparities and Labour Mobility: the Euro-11 versus the USA," LABOUR, CEIS, vol. 13(3), pages 737-760, 09.
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