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The Post-Unification German Labor Market


  • Bonin, Holger

    () (IZA)

  • Zimmermann, Klaus F.

    (University of Bonn)


This study surveys the development of the East German labor market after the unification of Germany. We explain that in the last decade, East Germans were faced with very high levels of joblessness that considering labor market exits and active labor market policy, are only partly reported as unemployment. A review of the evidence on the effectiveness of labor market policies suggests that job creation and training programs did not substantially promote reemployment, though they may have alleviated social burdens from unemployment. Discussing what causes the high unemployment in the east, we claim that effects of wage policy have been overrated. Differences in unemployment rates are also the result of more ample labor supply. We show that employment levels in the east have almost converged on western standards. The structure of employment, however, differs. Shortage of part-time work, service jobs and independent employment indicates that East Germany has failed to develop a service economy. We argue that unqualified adaptation to western procedures aggravated the investment and employment problem in the east.

Suggested Citation

  • Bonin, Holger & Zimmermann, Klaus F., 2000. "The Post-Unification German Labor Market," IZA Discussion Papers 185, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp185

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    References listed on IDEAS

    1. Haisken-DeNew, John P. & Schmidt, Christoph M., 1999. "Industry Wage Differentials Revisited: A Longitudinal Comparison of Germany and USA (1984-1996)," IZA Discussion Papers 98, Institute for the Study of Labor (IZA).
    2. Breedon, F J & Fisher, P G, 1996. "M0: Causes and Consequences," The Manchester School of Economic & Social Studies, University of Manchester, vol. 64(4), pages 371-387, December.
    3. van der Klaauw, B. & van Ours, J.C., 1999. "Labor Supply and Matching Rates for Welfare Recipients : An Analysis Using Neighborhood Characterisitics," Discussion Paper 1999-105, Tilburg University, Center for Economic Research.
    4. Jan Boone & Jan C. van Ours, 2000. "Modeling Financial Incentives to Get Unemployed Back to Work," Econometric Society World Congress 2000 Contributed Papers 0973, Econometric Society.
    5. Cahuc, Pierre & Zylberberg, André, 1999. "Job protection, minimum wage and employment," CEPREMAP Working Papers (Couverture Orange) 9914, CEPREMAP.
    6. Cahuc, Pierre & Zylberberg, Andre, 1999. "Redundancy Payments, Incomplete Labor Contracts, Unemployment and Welfare," IZA Discussion Papers 96, Institute for the Study of Labor (IZA).
    7. repec:iza:izadps:102 is not listed on IDEAS
    8. Husted, Leif & Skyt Nielsen, Helena & Rosholm, Michael & Smith, Nina, 2000. "Employment and Wage Assimilation of Male First Generation Immigrants in Denmark," CLS Working Papers 00-1, University of Aarhus, Aarhus School of Business, Centre for Labour Market and Social Research.
    9. van Ours, J.C. & Ridder, G., 1999. "Fast track or Failure : A Study of the Completion Rates of Graduate Students in Economics," Discussion Paper 1999-118, Tilburg University, Center for Economic Research.
    10. Wright, Robert E., 1999. "The Rate of Return to Private Schooling," IZA Discussion Papers 92, Institute for the Study of Labor (IZA).
    11. Giorgio Brunello & Clara Graziano & Bruno Parigi, 1999. "Ownership or Performance: What Determines Board of Directors' Turnover in Italy?," Working Papers 1999.30, Fondazione Eni Enrico Mattei.
    12. Barrett, Alan, 1999. "Irish Migration: Characteristics, Causes and Consequences," IZA Discussion Papers 97, Institute for the Study of Labor (IZA).
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    Cited by:

    1. Andersson, Frederik & Konrad, Kai A., 2001. "Globalization and human capital formation
      [Globalisierung und Humankapitalinvestitionen]
      ," Discussion Papers, Research Unit: Market Processes and Governance FS IV 01-01, Social Science Research Center Berlin (WZB).
    2. Puhani, Patrick A., 2001. "Wage Rigidities in Western Germany? Microeconometric Evidence from the 1990s," IZA Discussion Papers 334, Institute for the Study of Labor (IZA).
    3. Bonin, Holger & Euwals, Rob, 2001. "Participation Behavior of East German Women after German Unification," IZA Discussion Papers 413, Institute for the Study of Labor (IZA).
    4. Kuehn, Zoe, 2012. "Migration, Wages, and Parental Background: Obstacles to Entrepreneurship and Growth in East Germany," MPRA Paper 49250, University Library of Munich, Germany.
    5. Alexandra Fedorets, 2011. "Changes in Occupational Demand Structure and their Impact on Individual Wages," SFB 649 Discussion Papers SFB649DP2011-075, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    6. Snower, Dennis J. & Merkl, Christian, 2006. "The caring hand that cripples: The East German labor market after reunification (detailed version)," Kiel Working Papers 1263, Kiel Institute for the World Economy (IfW).
    7. Klaus F. Zimmermann, 2001. "Perspektiven für mehr Jobs in Deutschland," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 2(4), pages 359-362, November.

    More about this item


    transitional economies; East Germany; unemployment;

    JEL classification:

    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects


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