Decomposing the German East-West wage gap

Jan Kluge and Michael Weber

No 205, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: We demonstrate that almost one half of the observed wage gap between East and West Germany reflects differences in worker, establishment, and regional characteristics rather than differences in productivity at the establishment level. Regional price and establishment size differentials alone account for one quarter of the overall East-West wage gap. Differences in employees’ characteristics and in productivity deliver much smaller but still statistically significant contributions. We derive these results from an Oaxaca-Blinder decomposition using unusually rich linked employer-employee data. Our findings are quite stable over the period from 1996 to 2010 and over the wage distribution.

JEL-codes: J31 P25 R11 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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