Structural changes of economics in poland and New German Countries

The process of transition of the Polish economy from a centrally planned to a market economy started in the 1980s by a series of attempts to introduce economic reforms. By 1990–95, more important changes took place. The political and economic changes in the German Democratic Republic began near the end of 1989. The first step was the monetary union of both German states in June 1990. Although German unification (in October 1990) took place relatively later than the Polish reforms, the East German changes were greater. This paper discusses various macroeconomic indicators in both regions for the period 1990–95. These indicators are the dynamics and structure of gross domestic product, population number and employment, unemployment rate, and consumption structure.     

The role of social networks in determining migration and labour market outcomes

This paper empirically examines social network explanations for migration decisions in the context of German reunification. Using longitudinal data from the German Socio‐Economic Panel, we first show that the presence of a family in West Germany is an important predictor for the migration hazard rate of East Germans. We then explore whether pre‐migration networks have a discernible impact on the economic and social assimilation of East German immigrants in West Germany. We find that East German immigrants are more likely to be employed and to hold higher paying jobs when socially connected to the West prior to emigrating.     

The impact of two different economic systems on dishonesty

Using an artefactual field experiment, this paper tests the long-term implications of living in a specific economic system on individual dishonesty. By comparing cheating behaviour across individuals from the former socialist East of Germany with those of the capitalist West of Germany, we examine behavioural differences within a single country. We find long-term implications of living in a specific economic system for individual dishonesty when social interactions are possible: participants with an East German background cheated significantly more on an abstract die-rolling task than those with a West German background, but only when exposed to the enduring system of former West Germany. Moreover, our results indicate that the longer individuals had experienced socialist East Germany, the more likely they were to cheat on the behavioural task.     

How does entry regulation influence entry into self‐employment and occupational mobility?1

We analyse how an entry regulation that imposes a mandatory educational standard affects entry into self‐employment and occupational mobility. We exploit German reunification as a natural experiment and identify regulatory effects by comparing differences between regulated and unregulated occupations in East Germany with the corresponding differences in West Germany after reunification. Consistent with our expectations, we find that entry regulation reduces entry into self‐employment and occupational mobility after reunification more in regulated occupations in East Germany than in West Germany. Our findings are relevant for transition or emerging economies as well as for mature market economies requiring large structural changes after unforeseen economic shocks.     

Temporary overpessimism: Job loss expectations following a large negative employment shock

Job loss expectations were widespread amongst workers in East Germany following reunification with West Germany. Though experiencing a large negative employment shock, East German workers were nevertheless overpessimistic immediately after reunification with respect to their job loss risk. Over time, job loss expectations fell and converged to West German levels, which was driven by a stabilizing economic environment and by an adaptation of the interpretation of economic signals with workers learning to distinguish individual risk from firm-level risk. In fact, conditional on actual job loss risk, East German workers quickly caught up to West Germans regarding the share of correctly predicted job losses.     

Politics and parents — Intergenerational transmission of values after a regime shift

Exploiting the “natural experiment” of German reunification, we study whether socialism has an enduring effect on people's basic values. Using data from the German Socio-Economic Panel, we show that individuals that lived in the German Democratic Republic assign different importance to six out of nine values. The first subsequent generation differs in a similar way from their West German control group. The positive association between parents' and children's values does not significantly differ between East and West German families. The finding is consistent with the notion that parents are motivated by the belief that their own values are the best for the child to have. The effect of intergenerational transmission on the persistence of values is small to moderate. The link tends to be higher if the importance of a domain is more disputed in the population.     

The east german disease revisited

This paper attempts to explain the development of the East German economy since the political, social, and economic union with West Germany in 1990. An earlier contribution [Greiner et al., 1994] showed the different effects that produced joint deindustrialization in East Germany as an analogy of the well-known Dutch Disease phenomenon. This paper examines recent East German time series of main economic variables since 1994. Though the business sector and the unions are ever more willing to correct errors of the past, fiscal transfers from West to East Germany continue to exert their pressure on the tradeables sector. Economic policy should encourage savings in East Germany and gradually change the structure of (declining) transfers to expenditures that generate new capacities.     

Migration,Friendship Ties,and Cultural Assimilation

We study immigrant assimilation by analyzing whether friendship with natives is a measure of cultural assimilation, and by investigating the formation of social ties. Using the German Socio‐Economic Panel, we find that immigrants with a German friend are more similar to natives than those without German friends, along several important dimensions, including concerns about the economy, an interest in politics, and a host of policy issues. Turning to friendship acquisition, we find that becoming employed, time spent in the host country, the birth of a child, residential mobility, and additional education acquired in the host country are significant drivers of social network variation.     

Math,girls and socialism

This paper argues that the socialist episode in East Germany, which constituted a radical experiment in gender equality in the labor market and other instances, has left persistent tracks on gender norms. We focus on one of the most resilient and pervasive gender gaps in modern societies: mathematics. Using the German division as a natural experiment, we show that the underperformance of girls in math is sharply reduced in the regions of the former GDR, in contrast with those of the former FRG. We show that this East–West difference is due to girls’ attitudes, confidence and competitiveness in math, and not to other confounding factors, such as the difference in economic conditions or teaching styles across the former political border. We also provide illustrative evidence that the gender gap in math is smaller in European countries that used to be part of the Soviet bloc, as opposed to the rest of Europe. The lesson is twofold: (1) a large part of the pervasive gender gap in math is due to social stereotypes; (2) institutions can durably modify these stereotypes.     

EQUALITY OF OPPORTUNITY: EAST VS. WEST GERMANY

The case of German reunification has been subject to extensive research on earnings inequality and labour market integration. However, little is known about the development of equality of opportunity (EOp) in East and West Germany after 1990. Using German micro data, we empirically analyse how circumstances beyond the sphere of individual control relate to inequality in East and West Germany. Our results show that EOp is larger in East than in West Germany. However, despite increasing income inequality, EOp remained surprisingly constant.     

THE SHADOW ECONOMY: ILLICIT WORK AND HOUSEHOLD PRODUCTION: A MICROANALYSIS OF WEST GERMANY

This microanalysis of the shadow economy is on informal family income achieving strategies. In particular we analyze both sexes' paid illicit work as well as unpaid work in household production based on the representative West German Sfb3–Secondary Occupation Survey 1984. We estimate the influence of various socioeconomic variables including a legal occupation. As a result, illicit work and household production "Do-It-Yourself" activities are important informal family income achieving strategies. The respective regional state of the formal economy or one's own activities in social networks is of greater importance for informal economic activities than an individual income from formal economic activities.     

The East German wage structure after transition1

Abstract We extend the literature on transition economies’ wage structures by investigating the returns to tenure and experience. This study applies recent panel data and estimation approaches that control for hitherto neglected biases. We compare the life‐cycle structure of East and West German wages for fulltime employed men in the private sector. The patterns in the returns to seniority are similar for the two regional labour markets. The returns to experience lag behind in the East German labour market, even almost 20 years after unification, with significant differences particularly for high‐skill workers. The results are robust when only individuals who started their labour market career in the market economy are considered. We expect that the different returns are related to the heterogeneity of work experience gathered in East as compared with West Germany.     

Who stays,who goes,who returns?

We study the determinants of East–West migration within Germany during the period 1990–2006, using administrative data, the German Microcensus and the German Socio‐Economic Panel. We find that in addition to income prospects and employment status, two well‐known determinants of migration, psychological and social factors play an important role in determining the migration decision. Men and women move from East to West in proportionate numbers, but among individuals who lived in the East in 1989 women are more likely to migrate. The migrant body in the second wave of migration, starting in the late 1990s, is increasingly composed of young, educated people. By focusing on differences between temporary and permanent migrants, we find that older and single individuals are more likely to return East than stay permanently in the West, compared with younger and married individuals. Finally, the life satisfaction of permanent migrants increases significantly after a move, while that of temporary migrants remains essentially flat.     

Expectations and interest rates on mortgage loans

We examine the role of expectations for interest rates on mortgage loans. Our empirical results, based on cointegration tests, indicate a violation of the expectations hypothesis on the German loan market. In contrast to the capital market, a failure of the expectations hypothesis on the loan market cannot be attributed to the market segmentation hypothesis. Using a simple two-period model, we can show that the deviation from the expectations hypothesis is stronger than on the capital market and such that it confirms the common practice of choosing between loans with variable or fixed interest rates.An earlier version was presented at the annual meeting of theVerein für Socialpolitik 1994. We are grateful to Jürgen Wolters and an anonymous referee for their useful comments and suggestions.     

Media’s role in the making of a democrat: Evidence from East Germany

This paper explores the causal influence of media content on voting behavior. We exploit a natural experiment involving access to West German TV within the German Democratic Republic. Focusing on federal and state election outcomes in the post-reunification decade (i.e., a time at which TV content was harmonized), we find that municipalities that had access to Western TV broadcasts before reunification have lower vote shares for left-wing and right-wing extremist parties. With regard to potential channels, we provide evidence based on survey data that GDR citizens with access to West German TV were less loyal to the socialist regime, less hostile toward foreigners, and exhibited higher levels of social capital. Our findings thus support the notion that access to free media influences political attitudes and facilitates the consolidation of democracy.     

A different look at Lenin’s legacy: Social capital and risk taking in the Two Germanies

What are the long-term effects of Communism on economically relevant notions such as social trust, fairness, and scope of cooperation? To answer this question, we study the post-unification trajectory of convergence between East and West German individuals with regard to trust, cooperation, and risk. Our hypotheses are derived from a model of German unification that incorporates individual responses both to incentives and to values inherited from earlier generations as recently suggested in the literature. Using two waves of balanced panel data, we find that despite twenty years of unification East Germans are still characterized by a persistent level of social distrust. In comparison to West Germans, they are less inclined to see others as cooperative. East Germans are also found to have been more risk loving than West Germans. However, risk attitudes fully converged recently.     

Active labour market policy in East Germany

We investigate the effects of the most important East German active labour market programmes on the labour market outcomes of their participants. The analysis is based on a large and informative individual database derived from administrative data sources. Using matching methods, we find that over a horizon of 2.5 years after the start of the programmes, they fail to increase the employment chances of their participants in the regular labour market. However, the programmes may have other effects for their participants that may be considered important in the especially difficult situation experienced in the East German labour market.     

Income comparisons and attitudes towards foreigners - Evidence from a natural experiment

We exploit a natural experiment related to the German re-unification to address whether disutility from income comparisons affects attitudes towards foreigners. Our empirical approach rests upon East German individuals with West German relatives and friends. We use the exogenous variation of wealth of West Germans shortly after the fall of the Berlin Wall as an instrument to identify the effect of disutility from income comparisons on East Germans’ attitudes. We find robust evidence that East Germans express more negative attitudes towards foreigners, particularly from low-wage countries, if they worry about their economic status compared to better-off West Germans.     

Public infrastructure,production organization,and economic development

We develop a political economy model of growth to examine economic development led by the interactions between an economic decision concerning a firm’s production technology (CRS vs. IRS technology) and a political decision concerning public infrastructure. We show that multiple equilibrium growth paths occur due to differences in expectations regarding the quality of public infrastructure. These multiple paths illustrate why economies with poor initial conditions can catch up to and, furthermore, overtake economies with better initial conditions. Our result could explain the experiences of some East Asian countries where the co-evolution of public infrastructure and industrial transformation spurred economic development.     

ECONOMIC RELATIONS BETWEEN WOMEN AND THEIR PARTNERS: AN EAST AND WEST GERMAN COMPARISON AFTER REUNIFICATION

abstract

This article compares women's and men's economic relations in East and West Germany following the 1990 reunification to exemplify the impact of varying opportunity structures on women's relative contribution to family income. West Germany's takeover set in motion a rapid transformation of East German institutions and employment structures. The analysis shows that women in West Germany became less dependent on their partners in the 1990s, largely because fewer women were housewives without earnings. In contrast, the contributions of women to the family economy in East Germany fell between 1990 and 1996. Afterwards, women in East Germany regained some of their economic power because of their partners' increasing difficulties sustaining employment. A multivariate analysis showed that the fact that women in West Germany were more likely to work less or not at all – especially if they were married or had children – accounted for much of the difference.