Wage differentials between East and West Germany: are they related to the location or to the people?

W. Smolny and M. Kirbach

Applied Economics Letters, 2011, vol. 18, issue 9, 873-879

Abstract: Despite rapid economic integration and massive help from the Federal Government, large wage differences between East and West Germany still persist. We ask whether those differences are related to disadvantageous locational conditions in East Germany or could be found in the characteristics of the people living there. This article analyses income adjustment of East-West migrants based on the German Socio-Economic Panel (GSOEP), 1990-2008. Because migrants earned their income in both East and West Germany, the effect of the location can be identified. The results indicate that the wage differences cannot be attributed to the people.

Date: 2011
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DOI: 10.1080/13504851.2010.511990

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