The caring hand that cripples: The East German labor market after reunification (detailed version)

Arbeitspapier

The East German labor 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 labor cost(normalized by productivity) since the beginning of the nineties did not help to kick start the East. We suggest that labor force participants fell into "traps," concerning low skills, ageing of the workforce, labor-saving capital and skills, capital underutilization, and unemployment arising from the decline of the tradable sector.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 2066

Classification and Topics

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

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Snower, Dennis J. ; Merkl, Christian
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/3889
• Last update: 10.03.2025, 11:42 AM CET