Why Do People Still Live in East Germany?

49 Pages Posted: 5 May 2000 Last revised: 16 Oct 2010

See all articles by Jennifer Hunt

Jennifer Hunt

Rutgers University; McGill University - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; National Bureau of Economic Research (NBER)

Date Written: February 2000

Abstract

In 1997 GDP per capita in East Germany was 57% of that of West Germany, wage rates were 75% of western levels, and the unemployment rate was at least double the western rate of 7.8%. One would expect that if capital flows and trade in goods failed to bring convergence, labor flows would respond, enhancing overall efficiency. Yet net emigration from East Germany has fallen from high levels in 1989-1990 to close to zero. Using state-level data for all of Germany, available from 1991-1996, I am able to explain the downward trend in east to west migration using wage and unemployment information. Convergence in hourly wages is the most important factor. Analysis of the eastern sample of the German Socio-Economic Panel for 1990-1997 suggests that commuting is unlikely to substitute substantially for emigration. The individual-level data further indicate that emigrants are disproportionately young and skilled, and that individuals suffering a layoff or non-employment spell are also much more likely to emigrate.

Suggested Citation

Hunt, Jennifer, Why Do People Still Live in East Germany? (February 2000). NBER Working Paper No. w7564. Available at SSRN: https://ssrn.com/abstract=217531

Jennifer Hunt (Contact Author)

Rutgers University ( email )

75 Hamilton Street
New Brunswick, NJ 08901
United States

McGill University - Department of Economics ( email )

855 Sherbrooke Street West
Leacock Building Room 443
Montreal, QC H3A 2T7
Canada
514-398-6866 (Phone)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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