The collapse of the Berlin wall: Simulating state-level East to West German migration patterns

Abstract

This article suggests an agent-based dynamic programming model of migration to explain the observed state-level migration flows from East to West Germany since 1989. The agents in the model represent individuals in the five East German states who decide whether or not, when and whereto in the West to migrate. Agents respond to incentives provided by current and expected future unemployment and income differentials between states, moving costs and job search costs. Consistent with recent empirical evidence the simulation results show that agents who experience unemployment are more likely to emigrate. The large number of emigrants in the periods after the fall of the wall can be explained by an (initially) large number of very mobile individuals (e.g., young Easterners). Moreover, the predictions show that geographic proximity and the demand for technically skilled labor explain most of the observed distribution of migrants across west German states.