Wage Growth and Inequality Change During Rapid Economic Transition

IZA Logo
   

IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 16.09.2003, 12:15 - 13:30

   

Presentation by 

Ira N. Gang (Rutgers University)
   

Abstract:

East Germany underwent rapid transition from a socialist to a market-oriented economic system after
the fall of the Berlin Wall. During the course of this transition East Germany experienced large
increases in both its wage level and wage dispersion, with most of the increase in wage dispersion
occurring at the beginning of the transition. From 1990 to 2000 real wages in East Germany for men
aged 20-60 rose by 118%, while various inequality measures indicate an increase in wage inequality
of 25 to 61%. This paper studies the causes of this growth in wages and the changes in wage
inequality, the first two moments of the wage distribution. We find that changes in the wage structure
due to the transition explains most of wage growth and inequality change in East Germany. We
compare our 1990-2000 results for East Germany to West German wage earners during the same
period in order to investigate whether convergences took place in terms of mean (level) and
dispersion (inequality) of wages.

   
   
For more information, please contact seminar@iza.org