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Decomposing the German East–West wage gap

Author

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  • Jan Kluge
  • Michael Weber
Abstract
Wages in East Germany are persistently lower than in West Germany. We study the micro†level determinants of this spatial wage gap, using an Oaxaca–Blinder decomposition and rich linked employer–employee data. In total, up to one half of the aggregate wage differential can be attributed to structural differences in worker, establishment and regional characteristics. Regional price and establishment size differentials alone account for one quarter of the wage gap at the median. Price level differentials are even more relevant towards the top of the wage distribution. Towards the bottom, differences in union coverage become more important. Our findings are quite stable over the period from 1996 to 2010.

Suggested Citation

  • Jan Kluge & Michael Weber, 2018. "Decomposing the German East–West wage gap," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 26(1), pages 91-125, January.
    • Handle: RePEc:bla:etrans:v:26:y:2018:i:1:p:91-125
    DOI: 10.1111/ecot.12137
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    References listed on IDEAS

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    5. Chi, Wei & Li, Bo, 2008. "Glass ceiling or sticky floor? Examining the gender earnings differential across the earnings distribution in urban China, 1987-2004," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 243-263, June.
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    7. repec:iab:iabfda:201302(en is not listed on IDEAS
    8. Jörg Heining & Wolfram Klosterhuber & Stefan Seth, 2014. "An Overview on the Linked Employer-Employee Data of the Institute for Employment Research (IAB)," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 134(1), pages 141-148.
    9. Heining, Jörg & Scholz, Theresa & Seth, Stefan, 2013. "Linked-Employer-Employee data from the IAB: LIAB cross-sectional model 2 1993-2010 (LIAB QM2 9310)," FDZ Datenreport. Documentation on Labour Market Data 201302_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
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    2. Ferrentino, Rosa & Vota, Luca, 2024. "The development planning of the Italian Mezzogiorno: A statistical-mathematical analysis by a Real Business Cycle model," Socio-Economic Planning Sciences, Elsevier, vol. 96(C).
    3. Riphahn, Regina T. & Sauer, Irakli, 2024. "Earnings Assimilation of Post-reunification East German Migrants in West Germany," IZA Discussion Papers 17148, Institute of Labor Economics (IZA).
    4. Bhanu Pratap Singh & Akash Yadav & Kailash Chandra Pradhan, 2024. "Decomposing the Certified and Uncertified Skill Wage Gap for Production Workers in India," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 888-916, March.
    5. Bönke, Timm & Harnack, Astrid & Wetter, Miriam, 2019. "Wer gewinnt? Wer verliert? Die Entwicklung auf dem deutschen Arbeitsmarkt seit den frühen Jahren der Bundesrepublik bis heute," Discussion Papers 2019/4, Free University Berlin, School of Business & Economics.
    6. Müller, Steffen & Dettmann, Eva & Fackler, Daniel & Neuschäffer, Georg & Slavtchev, Viktor & Leber, Ute & Schwengler, Barbara, 2018. "Lohnunterschiede zwischen Betrieben in Ost- und Westdeutschland: Ausmaß und mögliche Erklärungsfaktoren. Ergebnisse aus dem IAB-Betriebspanel 2017," IAB-Forschungsbericht 201806, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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