Abstract

After the reunification of Germany, it quickly became clear that the centrally administered economy of the GDR would not be able to survive in the world market in large parts. Consequently, the East German economy literally collapsed after the borders were opened. East German industrial production fell by half between 1990 and the first quarter of 1992, and unemployment rose from zero to about 30 percent (including short-time work) in just a few months by the beginning of 1991. Although the situation on the eastern German labor market has improved considerably to date, the unemployment rate is still higher than in the western states. In addition, social security institutions are missing out on a considerable amount of contributions because wages in eastern Germany are still about a quarter to a third below the level in western Germany. The main cause of both problems - unemployment and low wages - is the fact that productivity has still not converged.The research project will examine and quantify at the level of companies how initial conditions and post-transition decisions, such as those of the Treuhandanstalt, have affected key economic indicators such as jobs, wages and productivity in the East and, on this basis, identify possible solutions for bringing wages and employment opportunities into line with the West.