Why Do Spatial Wage Gaps Persist? Ev idence from the Enduring Divide between East and West Germany (joint with Sebastian Heise)
Abstract:
< span style="font-size: 11pt; font-family: 'Calibri','sans-serif'; color: bl ack;">We study the origins of persistent spatial wage gaps in a novel frame work with worker reallocation both across establishments and across space. We estimate the model using matched employer-employee data from Germany. Th e country provides a perfect setting: more than 25 years after the fall of the Iron Curtain, West Germany's average real wage is, controlling for indi vidual characteristics, still 20% higher than that of the East, despite a d ynamic labor market in which one in five workers changes jobs every year. W hile sorting and labor market matching frictions are present, an important driver behind the gap's persistence is workers' strong preference to live i n their home region. Following workers across space, we show that East-born workers require a wage increase by about 27% more than West-born workers t o move from East to West Germany, and are likely to move back. This home bi as generates a segmented labor market in which East German firms paying low real wages are able to retain workers, and in which East German unemployme nt can remain relatively high.
DTSTAMP:20260406T103108Z DTSTART:20180704T010000Z DTEND:20180704T140000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR