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The Transition in East Germany: When is a Ten Point Fall in the Gender Wage Gap Bad News?

  • Jennifer Hunt

Since monetary union with western Germany on 1 July 1990, eastern female monthly wages have risen by 10 percentage points relative to male wages, but female employment has fallen 5 percentage points more than male employment. Using the German Socio-Economic Panel to study the years 1990-1994, I show that along with age, the wage of a worker in 1990 is the most important determinant of the hazard rate from employment. Differences in mean 1990 wages explain more than half of the gender gap in this hazard rate, since low earners were more likely to leave employment, and were disproportionately female. The withdrawal from employment of low earners can explain 40% of the rise in relative female wages. Competing risks analysis reveals that the wage has its effect through layoffs, and hence through labor demand, which is consistent with the hypothesis that union wage rises have caused the least productive to be laid off. There is no evidence that reduction in child care availability is a major factor in reducing female employment rates.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6167.

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Date of creation: Sep 1997
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Publication status: published as Hunt, Jennifer. "The Transition In East Germany: When Is A Ten-Point Fall In The Gender Wage Gap Bad News?," Journal of Labor Economics, 2002, v20(1,Jan), 148-169.
Handle: RePEc:nbr:nberwo:6167
Note: LS
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  1. Wolfgang Scheremet, 1995. "Tarifpolitik in Ostdeutschland: Ausstieg aus dem Lohnverhandlungsmodell der Bundesrepublik Deutschland?," Discussion Papers of DIW Berlin 113, DIW Berlin, German Institute for Economic Research.
  2. Steiner, Viktor & Wagner, Kersten, 1997. "East West German wage convergence - How far have we got?," ZEW Discussion Papers 97-25, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, August.
  4. Michael C. Burda & Christoph M. Schmitd, 1997. "Getting Behind the East-West [German] Wage Differential: Theory and Evidence," William Davidson Institute Working Papers Series 105, William Davidson Institute at the University of Michigan.
  5. Alan B. Krueger & Jorn-Steffen Pischke, 1995. "A Comparative Analysis of East and West German Labor Markets: Before and After Unification," NBER Chapters, in: Differences and Changes in Wage Structures, pages 405-446 National Bureau of Economic Research, Inc.
  6. Blau, Francine D & Kahn, Lawrence M, 1997. "Swimming Upstream: Trends in the Gender Wage Differential in 1980s," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 1-42, January.
  7. Rainer Pischner & Gert G. Wagner, 1995. "Bilanz der Erwerbschancen fünf Jahre nach der Wende in Ostdeutschland," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 62(46), pages 789-796.
  8. David Begg & Richard Portes, 1993. "Eastern Germany since unification: wage subsidies remain a better way," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 1(4), pages 383-400, December.
  9. 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.
  10. Viktor Steiner & Patrick A. Puhani, 1997. "Economic Restructuring, the Value of Human Capital, and the Distribution of Hourly Wages in Eastern Germany, 1990 to 1994," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 66(1), pages 197-204.
  11. Peter Krause, 1994. "Armut im Wohlstand: Betroffenheit und Folgen," Discussion Papers of DIW Berlin 88, DIW Berlin, German Institute for Economic Research.
  12. Licht, Georg & Steiner, Viktor, 1992. "Where have all the workers gone? Employment termination in East Germany after unification," ZEW Discussion Papers 92-12, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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