The aftermath of reunification

Sectoral transition, gender and rising wage inequality in East Germany



This article traces the evolution of the East German wage structure throughout the transition period 1992–2001. Wage dispersion has generally been rising. This increase occurred predominantly in the lower part of the wage distribution for women and in the upper part for men. Moreover, the sectoral transition affected female workers to a much larger extent than their male counterparts. A sequential decomposition analysis using quantile regressions reveals that changes in industry-specific remuneration schemes contributed strongly to the rise in wage inequality in the lower part of the distribution for women, whereas changes in the industry composition alone would have led to a polarization of wages. In contrast, for men, changes in individual characteristics are the single most important factor contributing to the increasing wage dispersion. These gender differences are attributed to employment segregation across industries present right after German reunification.