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Explaining the Low Labor Productivity in East Germany. A Spatial Analysis

  • Nicola Fuchs-Schündeln
  • Rima Izem

This paper presents a spatial analysis of unemployment rates in Germany. The goal of this analysis is to explain the stubbornly low labor productivity and high unemployment rates in Eastern Germany. We build a model of commuting to distinguish between worker and job characteristics as the main causes of the low labor productivity, and use the method of simulated moments to estimate the East-West ratios of worker and job characteristics. The “slope” of the unemployment rate across the former East-West border serves as the main identification of the model. The preliminary results suggest that East and West German skills are very similar, while job characteristics differ significantly between East and West.

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File URL: https://www.ifw-members.ifw-kiel.de/publications/explaining-the-low-labor-productivity-in-east-germany-a-spatial-analysis-1/kap1307.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1307.

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Length: 25 pages
Date of creation: Jan 2007
Handle: RePEc:kie:kieliw:1307
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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;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(2), pages 231-257, June.
  2. Andrea Boltho & Wendy Carlin & Pasquale Scaramozzino, 1999. "Will East Germany become a new Mezzogiorno?," Chapters, in: Economic Growth and Change, chapter 13 Edward Elgar Publishing.
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  4. Snower, Dennis J. & Merkl, Christian, 2006. "The Caring Hand that Cripples: The East German Labor Market After Reunification (Detailed Version)," IZA Discussion Papers 2066, Institute for the Study of Labor (IZA).
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  7. Harald Uhlig, 2006. "Regional Labor Markets, Network Externalities and Migration: The Case of German Reunification," American Economic Review, American Economic Association, vol. 96(2), pages 383-387, May.
  8. Stephen Redding & Daniel M. Sturm, 2005. "The costs of remoteness: evidence from German division and reunification," LSE Research Online Documents on Economics 3691, London School of Economics and Political Science, LSE Library.
  9. Bonin, Holger & Euwals, Rob, 2002. "Participation Behaviour of East German Women After German Unification," CEPR Discussion Papers 3201, C.E.P.R. Discussion Papers.
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  14. Michael C. Burda & Jennifer Hunt, 2001. "From Reunification to Economic Integration: Productivity and the Labor Market in Eastern Germany," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2), pages 1-92.
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  18. Rachel M. Friedberg, 1996. "You Can't Take It With You? Immigrant Assimilation and the Portability of Human Capital," NBER Working Papers 5837, National Bureau of Economic Research, Inc.
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  26. Giorgio Topa, 2001. "Social Interactions, Local Spillovers and Unemployment," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 261-295.
  27. M. Burda & C. Schmidt, 1997. "Getting Behind The East-West Wage Differential: Theory and Evidence," SFB 373 Discussion Papers 1997,77, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
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  29. Rothfels, Jacqueline, 1997. "Die ostdeutsche Wirtschaftsstruktur und die Produktivitätslücke," Wirtschaft im Wandel, Halle Institute for Economic Research (IWH), vol. 3(13), pages 15-21.
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  33. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, Enero.
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