Since the collapse of the socialist regimes in Eastern Europe, the former West Germany has experienced a large inflow of emigrants from both the former East Germany and other Eastern European countries. Much of this immigration has consisted of ‘ethnic’ Germans migrating to the former West Germany. In Discussion Paper No. 1512, Thomas Bauer and Klaus Zimmermann survey the pattern of the immigration prior to 1989, and analyse its impact on the labour market.

They find that the collapse of socialism resulted in a dramatic change in the origin of immigrants. Prior to 1989, the inflow of immigrants was dominated by migrants from Poland. After 1989, however, migrants mainly came from the former USSR. The authors examined the earnings of the immigrants and found that there was no difference initially in pre-immigration earnings between Eastern Europeans and comparable East Germans. As time persisted, however, the earnings of immigrants from Eastern Europe rose faster than those of former East German migrants. Bauer and Zimmermann attribute this to the fact that Eastern European immigrants invested more in country-specific human capital. In addition, they found that males and immigrants who were able to make use of national and family networks had a significant earnings advantage compared with females and immigrants without access to such networks. In addition, immigrants from Poland and the former USSR had a higher probability of becoming unemployed than immigrants from East Germany and Romania. Unemployment probability decreased, however, with length of residence in Germany, with years of schooling, and for those who immigrated after 1988.

Unemployment and Wages of Ethnic Germans
Thomas Bauer and Klaus F Zimmermann