Returns to education: not until 2005 did East German men do as well as Westerners, but Eastern women did better

Abstract

"German unification created a natural experiment through which it can be learned how human capital obtained in a socialist system is rewarded in a free-market economy, and also how long it takes for rewards to equalise. A central finding is that returns to education for Eastern men fell a lot during the transition and, on average, took about fifteen years to reach Western levels, although migrants got there faster. For Eastern women results are quite different. Soon after transition they began to gain the same or better returns than Western women, but this way probably because, through education and experience in the GDR, they had acquired high skills levels and a strong commitment to a working career. Unlike returns to education, average returns to work experience remain lower for Easterners than Westerners. It appears, though, that this is due to the lower value of experience acquired in the GDR. Returns to experience gained since 1990 appear not dissimilar to those in the West. In general, there has been convergence in returns to human capital between the Eastern and Western states, although it should not be forgotten that actual wage levels are still much higher in the West." (Text excerpt, IAB-Doku) ((en))

Cite article

Lupo, K. & Anger, S. (2008): Returns to education: not until 2005 did East German men do as well as Westerners, but Eastern women did better. In: B. Headey & E. Holst (Hrsg.) (2008): A quarter century of change : results from the German Socio-Economic Panel (SOEP) (SOEP Wave report, 1-2008), p. 63-68.