Abstract
The aim of this paper is to analyze the causes of the rapid wage equalization between eastern and western Germany following in the first years after economic unification in 1990. The paper is divided into four parts. In Part 1, we summarize the basic facts of the eastern German labor market after economic unification as far as they are relevant for the purpose at hand. In Part 2, we recapitulate the causes of the sharp rise of unemployment in eastern Germany after unification. In Part 3, we turn to the reasons for East/West-wage equalization. We evaluate a few different theories, which have been advanced to explain the observed rapid rise of the eastern real wage level in the face of drastically increasing unemployment. In particular, we discuss whether the observed facts should be seen as the logical consequence of historically unique economic circumstances (e.g., due to the high East/West-mobility of the labor force or to the end-game characteristics of eastern German wage bargaining), or whether they are better viewed as the ‘natural’ outcome of German-style corporatism. In Part 4, we evaluate some normative economic arguments that have been advanced in favor of a rapid East/West-wage equalization. Particular emphasis is put on matters of interregional mobility, human capital accumulation, and the path of structural change.
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Paqué, KH. (2001). East/West-Wage Rigidity in United Germany. In: Riphahn, R.T., Snower, D.J., Zimmermann, K.F. (eds) Employment Policy in Transition. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-56560-1_4
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DOI: https://doi.org/10.1007/978-3-642-56560-1_4
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