The caring hand that cripples: The East Germany labour market after reunification

Arbeitspapier

The East German labour market has hardly made any progress since German reunification, despite massive migration flows and support from the West. We argue that East Germany is in trouble precisely because of the support it has received. This paper explores the phenomenon of 'the caring hand that cripples,' arising from bargaining by proxy, the adoption of the West German welfare system and the associated employment persistence. Even the steady decrease of labour cost (normalized by productivity) since the beginning of the 1990s did not help to kick start the East. We suggest that labour force participants fell into 'traps,' concerning low skills, ageing of the workforce, labour-saving capital and skills, capital underutilization, and unemployment arising from the decline of the tradeable sector.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CEPR Discussion Paper Series ; No. 5656

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
• Subject: Arbeitslosigkeit ; Arbeitsmarktflexibilisierung ; Sozialstaat ; Wirtschaftliche Anpassung ; Subvention ; Neue Bundesländer

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Snower, Dennis J. ; Merkl, Christian
• Event: Veröffentlichung
• (who): Centre for Economic Policy Research (CEPR)
• (where): London
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/3828
• Last update: 10.03.2025, 11:42 AM CET