Eastern Germany: High Income Gains from the German Reunification

On the one hand, 19 per cent of Eastern Germans who were aged 25 or older in 1990 experienced material loss as a result of the German reunification. In the period from 1991 to 1998, they achieved on average a smaller income then they could have expected in a still existing GDR. On the other hand, the total gains surpass the total loss by a factor of ten.

This is the result of a joint study by the Centre for European Economic Research (ZEW), Mannheim, and the Freie Universität Berlin. This was the first study in which scientists compared real incomes in order to identify the winners and losers or reunification in Eastern German. They therefore compared the zero-coupon actual incomes cumulatively achieved by Eastern Germans in the period between 1991 and 1998 with the income that the same persons would have achieved in a still existing GDR. If the balance was negative, reunification resulted in an income loss.

The study indicated significant gaps between different age groups. With around 28 per cent, the group which lost out to the greatest extent as a result of reunification were those aged 35 to 54 in the year 1990. This group was hit the hardest by the changed skill requirements in the new economic system. In contrast, only one per cent of people aged 64 or older experienced an income loss. This result is not a big surprise - this age group were not in employment at the point at which the economy collapsed. Instead, this group benefited from the introduction of the Western German retirement system.

The study shows that the majority of Eastern Germans benefited from the reunification in terms of an increase in real income. The gains and losses are, however, unequally distributed.

Contact

Prof. Dr Miriam Beblo, E-mail: beblo@zew.de

Prof. Irwin L. Collier, PhD, E-mail: collier@wiwiss.fu-berlin.de

Thomas Knaus, E-mail: knaustho@wiwiss.fu-berlin.de