IDEAS home Printed from https://ideas.repec.org/p/zbw/ifwkwp/1045.html
   My bibliography  Save this paper

Minimum Wages and Employment: The Case of German Unification

Author

Listed:
  • Heitger, Bernhard

Abstract

Analysis in terms of the two-sector open economy shows that in bringing the market economy to East Germany, West Germany seems to have disregarded important fundamentals. Premature formation of a currency union led to a substantial real appreciation of the East German currency. Premature implementation of the West German system of wage bargaining resulted in inappropriate minimum wage schedules. Both measures made East German production possibilities and employment decline.

Suggested Citation

  • Heitger, Bernhard, 2001. "Minimum Wages and Employment: The Case of German Unification," Kiel Working Papers 1045, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1045
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/17724/1/kap1045.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dornbusch, Rudiger, 1993. "The End of the German Miracle," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 881-885, June.
    2. Rudiger Dornbusch & Holger C. Wolf, 1994. "East German Economic Reconstruction," NBER Chapters, in: The Transition in Eastern Europe, Volume 1, Country Studies, pages 155-190, National Bureau of Economic Research, Inc.
    3. Richard A. Brecher, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 88(1), pages 98-116.
    4. John Kennan, 1995. "The Elusive Effects of Minimum Wages," Journal of Economic Literature, American Economic Association, vol. 33(4), pages 1950-1965, December.
    5. Marcus Noland, 1996. "German Lessons for Korea: The Economics of Unification," Working Paper Series WP96-3, Peterson Institute for International Economics.
    6. Bruno, Michael, 1976. "The Two-Sector Open Economy and the Real Exchange Rate," American Economic Review, American Economic Association, vol. 66(4), pages 566-577, September.
    7. Hans‐Werner Sinn, 1995. "Staggering along: wages policy and investment support in East Germany," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 3(4), pages 403-426, December.
    8. W. E. G. Salter, 1959. "Internal And External Balance: The Role Op Price And Expenditure Effects," The Economic Record, The Economic Society of Australia, vol. 35(71), pages 226-238, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Snower, Dennis J. & Merkl, Christian, 2006. "The Caring Hand that Cripples: The East German Labor Market After Reunification (Detailed Version)," IZA Discussion Papers 2066, Institute of Labor Economics (IZA).
    2. Peter Huber & Herbert Brücker & Janos Köllö & Iulia Traistaru & Tomasz Mickiewicz, 2002. "Regional and Labour Market Development in Candidate Countries. A Literature Survey," WIFO Studies, WIFO, number 23340, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bernhard Heitger, 2001. "Minimum Wages And Employment: The Case Of German Unification," International Economic Journal, Taylor & Francis Journals, vol. 17(1), pages 1-15.
    2. Marcus Noland & Sherman Robinson & Ligang Liu, 1999. "The economics of korean unification," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 3(3), pages 255-299.
    3. Noland, Marcus & Robinson, Sherman & Wang, Tao, 2000. "Modeling Korean Unification," Journal of Comparative Economics, Elsevier, vol. 28(2), pages 400-421, June.
    4. Claro, Sebastian, 2006. "Supporting inefficient firms with capital subsidies: China and Germany in the 1990s," Journal of Comparative Economics, Elsevier, vol. 34(2), pages 377-401, June.
    5. Jinzhao Chen, 2015. "Interprovincial Competitiveness and Economic Growth: Evidence from Chinese Provincial Data (1992–2008)," Pacific Economic Review, Wiley Blackwell, vol. 20(3), pages 388-414, August.
    6. Polackova, Hana, 1997. "Inflation in nontradables and the macroeconomic policy mix : a model with policy application to transition economies," Policy Research Working Paper Series 1702, The World Bank.
    7. Aizenman, Joshua & Frenkel, Jacob A., 1988. "Sectorial wages and the real exchange rate," Journal of International Economics, Elsevier, vol. 24(1-2), pages 69-91, February.
    8. Maurice Obstfeld, 1986. "Capital Flows, the Current Account, and the Real Exchange Rate: Some Consequences of Stabilization and Liberalization," NBER Chapters, in: Economic Adjustment and Exchange Rates in Developing Countries, pages 201-232, National Bureau of Economic Research, Inc.
    9. Ross Guest & Anthony Makin, 2013. "Special Issue. Guest Editor: Zhihao Yu," Review of Development Economics, Wiley Blackwell, vol. 17(3), pages 609-626, August.
    10. Makin, Anthony J., 2013. "Commodity prices and the macroeconomy: An extended dependent economy approach," Journal of Asian Economics, Elsevier, vol. 24(C), pages 80-88.
    11. Takuji Kinkyo, 2004. "Disorderly adjustments to exchange rate misalignments: The experience of Korea," Working Papers 140, Department of Economics, SOAS University of London, UK.
    12. Brock, Philip L., 2011. "The Penn-Balassa-Samuelson effect through the lens of the dependent economy model," Journal of Economic Dynamics and Control, Elsevier, vol. 35(9), pages 1547-1556, September.
    13. Sebastián Claro, 2004. "Vertical and Horizontal Dimensions of Trade Liberalization," Documentos de Trabajo 265, Instituto de Economia. Pontificia Universidad Católica de Chile..
    14. Ahmed, Habib & Miller, Stephen M., 1997. "Monetary and exchange rate policy in multisectoral economies," Journal of Economics and Business, Elsevier, vol. 49(4), pages 321-334.
    15. Schiff, Maurice & Valdes, Alberto, 1998. "Agriculture and the macroeconomy," Policy Research Working Paper Series 1967, The World Bank.
    16. Ariel Burstein & Martin Eichenbaum & Sergio Rebelo, 2005. "Large Devaluations and the Real Exchange Rate," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 742-784, August.
    17. Schweinberger, Albert G., 2001. "Capital, heterogeneous labour, global goods markets and unemployment," Discussion Papers, Series I 309, University of Konstanz, Department of Economics.
    18. Richard A. Brecher & Zhiqi Chen, 2014. "Unemployment and welfare consequences of international outsourcing under monopolistic competition," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(2), pages 540-554, May.
    19. repec:dgr:rugsom:00c21 is not listed on IDEAS
    20. Schmieding, Holger, 1991. "From socialism to an institutional void: Notes on the nature of the transformation crisis," Kiel Working Papers 480, Kiel Institute for the World Economy (IfW Kiel).
    21. repec:phd:pjdevt:jpd_1990_vol__xvii_no__2-d is not listed on IDEAS
    22. Kala Krishna & Abhiroop Mukhopadhyay & Cemile Yavas, 2005. "Trade with Labor Market Distortions and Heterogeneous Labor: Why Trade Can Hurt," Contributions to Economics, in: Günter S. Heiduk & Kar-yiu Wong (ed.), WTO and World Trade, pages 65-83, Springer.

    More about this item

    Keywords

    Minimum Wages; Employment; German Unification;
    All these keywords.

    JEL classification:

    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:ifwkwp:1045. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/iwkiede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.