The Value of Reunification in Germany: An Analysis of Changes in Life Satisfaction

Paul Frijters, John de New and Michael Shields

No 419, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We quantify the value of changes in life circumstances in Germany following reunification. To this end, we develop and implement a fixed-effect estimator for ordinal life satisfaction in the German Socio-Economic Panel. We find strong negative effects on life satisfaction from being recently fired, losing a spouse through either death or separation and time spent in hospital, whilst we find strong positive effects from income and marriage. Using a new causal decomposition technique, we find that East Germans experienced a continued improvement in life satisfaction after 1990 to which increased household incomes contributed around 12%. Most of the increase is explained by improved average circumstances, such as public services. For West Germans, we find virtually no change in satisfaction between 1991 and 1999.

Keywords: random and fixed-effects; German reunification; Life satisfaction; panel (search for similar items in EconPapers)
JEL-codes: C23 C25 I31 Z1 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2002-01
New Economics Papers: this item is included in nep-pke
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Citations: View citations in EconPapers (9)

Published - published in: Journal of Human Resources, 2004, 39 (3), 649-674

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Related works:
Working Paper: The Value of Reunification in Germany: An Analysis of Changes in Life Satisfaction (2003)
Working Paper: The Value of Reunification in Germany: An Analysis of Changes in Life Satisfaction (2001)
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