East German unemployment: the myth of the irrelevant labor market

Arbeitspapier

This paper indicates that East Germany's unemployment originates primarily in the labor market, caused by the fast wage adjustment after German reunification. We model the resulting labor market traps in a search and matching framework, show that they are difficult to overcome, and provide empirical evidence. We argue that under these circumstances, demand-side policies are effective mainly when they increase the economy's overall productivity and thereby help overcome the labor market traps.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Kiel Working Paper ; No. 1435

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Wages, Compensation, and Labor Costs: General ; Unemployment: Models, Duration, Incidence, and Job Search
• Subject: Unemployment ; labor market trap ; East Germany ; Arbeitslosigkeit ; Lohnpolitik ; Anspruchslohn ; Nationale Einheit ; Rationalisierung ; Arbeitsproduktivität ; Arbeitsmarktflexibilisierung ; Neue Bundesländer

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Merkl, Christian ; Snower, Dennis J.
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/24830
• Last update: 10.03.2025, 11:43 AM CET