Reversal of Migration Flows: A Fresh Look at the German Reunification

CER-ETH – Center of Economic Research at ETH Zurich Working Paper No. 16/259

62 Pages Posted: 15 Sep 2016

See all articles by Volker Grossmann

Volker Grossmann

University of Fribourg - Faculty of Economics and Social Science; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Andreas Schaefer

University of Leipzig

Thomas Michael Steger

University of Leipzig/Institute for Theoretical Economics/Macroeconomics; CESifo (Center for Economic Studies and Ifo Institute)

Benjamin Fuchs

University of Hohenheim

Date Written: September 14, 2016

Abstract

We investigate the dynamic effects of interregional labor market integration on migration flows, capital formation, and the price for housing services. The co-evolution of these variables depends on initial conditions at the time of labor market integration. In an initially capital-poor economy, there may be a reversal of migration flows during the transition to the steady state, while housing costs are increasing over time. Although capital may accumulate while labor emigrates early in the transition, the causal effect of immigration on capital investments and housing costs is positive. We present new data on the evolution of net migration flows and rental rates for housing in East Germany after 1990. Our results are consistent with the presented evidence in the reverse migration scenario.

Keywords: Capital Formation, German Reunification, Housing Services, Labor Market Integration, Reverse Migration

JEL Classification: D90, F20, O10

Suggested Citation

Grossmann, Volker and Schaefer, Andreas and Steger, Thomas Michael and Fuchs, Benjamin, Reversal of Migration Flows: A Fresh Look at the German Reunification (September 14, 2016). CER-ETH – Center of Economic Research at ETH Zurich Working Paper No. 16/259 , Available at SSRN: https://ssrn.com/abstract=2838850

Volker Grossmann

University of Fribourg - Faculty of Economics and Social Science ( email )

Fribourg, CH 1700
Switzerland

Institute for the Study of Labor (IZA)

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

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Andreas Schaefer

University of Leipzig ( email )

Marschnerstrasse 31
D-04109 Leipzig, 04109
Germany

Thomas Michael Steger (Contact Author)

University of Leipzig/Institute for Theoretical Economics/Macroeconomics ( email )

Grimmaische Str. 12
D-04109 Leipzig
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Benjamin Fuchs

University of Hohenheim ( email )

Fruwirthstr. 48
Stuttgart, 70599
Germany

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