Income Security Policy Paper No. 15

Labor Earnings and Household Income Mobility in Reunified Germany: A Comparison of the Eastern and Western States

Richard Hauser and Holger Fabig

May 1997 

Abstract:  Using data from the German Socio-Economic Panel (GSOEP) we compare the economic mobility of persons living in the eastern and western states of Germany between 1990 and 1995. We find that gross individual labor income mobility was initially much higher in the east than in the west following reunification, but by 1995 the gap had been greatly reduced. We find similar results when we change our measures to more accurately reflect economic well-being. Gross equivalent labor income and net equivalent income mobility were initially higher in the eastern states than in the western states but there has been convergence over time. By 1995 there was little difference in net equivalent income mobility patterns in the two regions of Germany. This finding suggests that the German social protection system has dramatically reduced mobility risks associated with the transformation to a market economy in the eastern states of Germany.

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