The Aftermath of Reunification: Sectoral Transition, Gender, and Rising Wage Inequality in East Germany

39 Pages Posted: 23 May 2011

See all articles by Karsten Kohn

Karsten Kohn

Kreditanstalt für Wiederaufbau (KfW), KfW Development Bank; IZA Institute of Labor Economics

Dirk Antonczyk

University of Freiburg; IZA Institute of Labor Economics

Abstract

Using a large administrative data set, this paper studies the evolution of the East German wage structure throughout the transition period 1992-2001. Wage dispersion has generally been rising. The increase occurred predominantly in the lower part of the wage distribution for women and in the upper part for men. Sectoral transition affected women to a much larger extent than men. A sequential decomposition analysis using quantile regressions reveals that changes in industry-specific remuneration schemes contributed strongly to the rise in wage inequality in the lower part of the distribution for female workers. On the other hand, inter-industry trends away from the manufacturing sector towards service sectors contribute to the smaller increase of inequality in the upper part of the distribution, while causing wage dispersion in the lower part of the distribution to decline. Changes in the industry composition alone would have led to a polarization of wages for female workers. For men, changes in individual characteristics and a general time trend contribute the largest part to the increasing wage dispersion. These gender differences result from employment segregation across industries right after German reunification, and a particularly strong concentration of females in the public sector.

Keywords: wage distribution, transition, gender, decomposition, quantile regression, polarization, East Germany

JEL Classification: J31, C21

Suggested Citation

Kohn, Karsten and Antonczyk, Dirk, The Aftermath of Reunification: Sectoral Transition, Gender, and Rising Wage Inequality in East Germany. IZA Discussion Paper No. 5708, Available at SSRN: https://ssrn.com/abstract=1849463

Karsten Kohn (Contact Author)

Kreditanstalt für Wiederaufbau (KfW), KfW Development Bank ( email )

Palmengartenstr. 5-9
Frankfurt, 60325
Germany

IZA Institute of Labor Economics ( email )

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

Dirk Antonczyk

University of Freiburg ( email )

Fahnenbergplatz
Freiburg, D-79085
Germany

IZA Institute of Labor Economics ( email )

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

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