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The unification bonus (malus) in postwall Eastern Germany

Author

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  • Beblo, Miriam
  • Collier, Irwin L.
  • Knaus, Thomas

Abstract

This paper presents estimates of the unification bonus for East Germans over the period 1991 to 1998. The unification bonus is defined as the discounted value of the difference between a person?s actual income and his or her counterfactual real income stream forecast for a hypothetical continuation of economic life in a static GDR. The two main issues tackled in this study are the construction of valid deflators for a comparison of real incomes during the transition from a centralized to a market economy and the estimation of plausible counterfactual income streams. Our central result is that 19 percent of East Germans received a present value malus and so can be regarded as unification losers but that the aggregate bonus is ten times the size of the aggregate malus of the sample.

Suggested Citation

  • Beblo, Miriam & Collier, Irwin L. & Knaus, Thomas, 2001. "The unification bonus (malus) in postwall Eastern Germany," ZEW Discussion Papers 01-29, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:5384
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    File URL: https://www.econstor.eu/bitstream/10419/24450/1/dp0129.pdf
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    References listed on IDEAS

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    1. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
    2. Burkhauser, Richard V & Smeeding, Timothy M & Merz, Joachim, 1996. "Relative Inequality and Poverty in Germany and the United States Using Alternative Equivalence Scales," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 42(4), pages 381-400, December.
    3. Wolfgang Franz & Viktor Steiner, 2000. "Wages in the East German Transition Process: Facts and Explanations," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 241-269, August.
    4. Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, vol. 13(1), pages 25-42, January.
    5. Collier, Irwin L, Jr, 1986. "Effective Purchasing Power in a Quantity Constrained Economy: An Estimate for the German Democratic Republic," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 24-32, February.
    6. Collier, Irwin L, Jr, 1989. "The Measurement and Interpretation of Real Consumption and Purchasing Power Parity for a Quantity-Constrained Economy: The Case of East and West Germany," Economica, London School of Economics and Political Science, vol. 56(221), pages 109-120, February.
    7. Markus M. Grabka & Birgit Otto, 2001. "Angleichung der Markteinkommen privater Haushalte zwischen Ost- und Westdeutschland nicht in Sicht," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 68(4), pages 51-56.
    8. E. Rothbarth, 1941. "The Measurement of Changes in Real Income under Conditions of Rationing," Review of Economic Studies, Oxford University Press, vol. 8(2), pages 100-107.
    9. Hauser, Richard & Fabig, Holger, 1999. "Labor Earnings and Household Income Mobility in Reunified Germany: A Comparison of the Eastern and Western States," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(3), pages 303-324, September.
    10. Gerlinde Sinn & Hans-Werner Sinn, 1994. "Jumpstart: The Economic Unification of Germany," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691728, January.
    11. Steiner, Viktor & Puhani, Patrick A., 1996. "Die Entwicklung der Lohnstruktur im ostdeutschen Transformationsprozeß," ZEW Discussion Papers 96-03, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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    Cited by:

    1. Michael C. Burda, 2006. "Factor Reallocation in Eastern Germany after Reunification," American Economic Review, American Economic Association, vol. 96(2), pages 368-374, May.
    2. 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.
    3. Heinz Vortmann & Jan Goebel & Peter Krause & Gert G. Wagner, 2013. "Zur Entwicklung der Preisniveaus in Ost- und Westdeutschland: zugleich eine Dokumentation verschiedener Preisniveau-Zeitreihen für das geteilte und für das vereinigte Deutschland," Discussion Papers of DIW Berlin 1269, DIW Berlin, German Institute for Economic Research.
    4. Jan Goebel & Peter Krause & Joachim R. Frick & Markus M. Grabka & Gert G. Wagner, 2010. "Eine exemplarische Anwendung der regionalisierten Preisniveau-Daten des BBSR auf die Einkommensverteilung für die Jahre 2005 bis 2008," SOEPpapers on Multidisciplinary Panel Data Research 284, DIW Berlin, The German Socio-Economic Panel (SOEP).

    More about this item

    Keywords

    Real income comparison; income distribution and mobility; economies in transition;

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D1 - Microeconomics - - Household Behavior
    • P2 - Economic Systems - - Socialist Systems and Transition Economies

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