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Decomposing the German East-West wage gap

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  • Michael Weber

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  • Jan Kluge

Abstract

We demonstrate that almost one half of the observed wage gap between East and West Germany reflects differences in worker, establishment, and regional characteristics rather than differences in productivity at the establishment level. Regional price and establishment size differentials alone account for one quarter of the overall East-West wage gap. Differences in employees? characteristics and in productivity deliver much smaller but still statistically significant contributions. We derive these results from an Oaxaca-Blinder decomposition using unusually rich linked employer-employee data. Our findings are quite stable over the period from 1996 to 2010 and over the wage distribution.

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  • Michael Weber & Jan Kluge, 2015. "Decomposing the German East-West wage gap," ERSA conference papers ersa15p636, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa15p636
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    Cited by:

    1. Jan Kluge, 2018. "Sectoral diversification as insurance against economic instability," Journal of Regional Science, Wiley Blackwell, vol. 58(1), pages 204-223, January.
    2. JanKluge & MichaelWeber, 2016. "Was erklärt die Lohnunterschiede zwischen Ost- und Westdeutschland?," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 23(02), pages 03-09, April.
    3. Jurica Bosna, 2018. "Estimation Of The Great Decoupling On The Example Of Croatia, As Compared With Germany And Poland," Poslovna izvrsnost/Business Excellence, Faculty of Economics and Business, University of Zagreb, vol. 12(1), pages 33-52.

    More about this item

    Keywords

    wage quantiles; wage differentials; Oaxaca-Blinder decomposition; RIF-regression;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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