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The Transition in East Germany: When is a Ten Point Fall in the Gender Wage Gap Bad News?
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The Transition in East Germany: When is a Ten Point Fall in the Gender Wage Gap Bad News?

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  • Jennifer Hunt

Abstract

Since monetary union with western Germany on 1 July 1990, eastern female monthly wages have risen by 10 percentage points relative to male wages, but female employment has fallen 5 percentage points more than male employment. Using the German Socio-Economic Panel to study the years 1990-1994, I show that along with age, the wage of a worker in 1990 is the most important determinant of the hazard rate from employment. Differences in mean 1990 wages explain more than half of the gender gap in this hazard rate, since low earners were more likely to leave employment, and were disproportionately female. The withdrawal from employment of low earners can explain 40% of the rise in relative female wages. Competing risks analysis reveals that the wage has its effect through layoffs, and hence through labor demand, which is consistent with the hypothesis that union wage rises have caused the least productive to be laid off. There is no evidence that reduction in child care availability is a major factor in reducing female employment rates.

Suggested Citation

  • Jennifer Hunt, 1997. "The Transition in East Germany: When is a Ten Point Fall in the Gender Wage Gap Bad News?," NBER Working Papers 6167, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6167
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    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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