DP2106 Post-Unification Wage Growth in East Germany

Author(s): Jennifer Hunt
Publication Date: March 1999
Keyword(s): job changing, Migration, Unions, Wages
JEL(s): J3, P2
Programme Areas: Labour Economics, Transition Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2106

Following monetary union with west Germany in June 1990 the median real monthly wage of prime age east German workers rose by 83% in six years. I use the German Socio-Economic Panel data to investigate the determinants of this wage growth and some of its implications. For the 1990-1991 period I find that the biggest gainers were low-wage workers generally, and women and the less educated specifically. In the 1991-1996 period the biggest gainers were women and the better educated. Job changing rates were high: a majority of workers had changed jobs by 1996. The return to job changing, particularly changing to a job in the west, was high in 1990-1991 but fell greatly in the later period, so that overall only 18% of wage growth was due to job changing within the east, and 7% to east-west job changing.