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Title:On the post-unification development of public and private pay in Germany PDF Logo
Authors:Heitmüller, Axel
Mavromaras, Kostas
Issue Date:2005
Series/Report no.:IZA Discussion Papers 1696
Abstract:German post-unification in the 1990s is a period that was marked by substantial economic change, part of which was East German wages building towards the much higher West German levels. This paper studies the public-private pay gap in the fast changing economic and political environment of the 1990s using panel estimation techniques which control for unobserved individual heterogeneity. It shows that, while the overall pay gap between public and private sector stayed remarkably constant in the West, earnings differences in the East increased threefold in the late 1990s resulting in a substantial wage premium in the public sector. It is suggested that this premium is a result of the politically induced gap between pay and actual productivity. Furthermore, results vary greatly by gender indicating significantly larger female earnings differentials. Several institutional and political arguments are presented to explain this phenomenon.
Subjects:public-private sector pay differential
decomposition
Germany
JEL:J78
J31
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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