The Skill Loss of Older East Germans after Unification

Abstract

This paper documents and analyzes changes in relative wages of older East Germans after unification. In 1990, employees above 45 started out with very low wages relative to younger East Germans or West Germans in the same cohort. Results suggest that older employees lost up to 30 percent of their earnings because socialist work experience fully depreciated after the regime change. Older employees lost further in relative terms because they earned much lower returns to education and occupational skills than younger East Germans early in the transition.