The Unification Bonus (Malus) of East Germans After the Fall of the Berlin Wall

Beblo, Miriam; Collier, Irwin L.; Knaus, Thomas

doi:2012.27.2.222

The Journal of Economic Integration 2012 June;27(2) :222-244.
DOI: https://doi.org/10.11130/jei.2012.27.2.222

The Unification Bonus (Malus) of East Germans After the Fall of the Berlin Wall

Miriam Beblo, Irwin L. Collier, Thomas Knaus,

Berlin School of Economics and Law
Freie Universität Berlin
German Federal Ministry of Economics and Technology

ABSTRACT

This paper presents estimates of the unification bonus for East Germans over the period 1991 to 1998. The unification bonus is defined as the discounted value of the difference between a person's actual income and his or her counterfactual real income stream forecast for a hypothetical continuation of economic life in a static GDR. Our central result is that nineteen percent of East Germans received a present value malus and so can be regarded as unification losers but that the aggregate bonus is ten times the size of the aggregate malus of the sample over this period.

JEL Classification: D1, D3, P2

Keywords: Real Income Comparison | Income Distribution and Mobility | Economies In Transition

REFERENCE

1.	Akerlof, George A., Rose, Andrew K., Yellen, Janet L. and Hessenius, Helge (1991), East Germany in from the Cold: The Economic Aftermath of Currency Union, Brookings Papers for Economic Activity, Vol. I, 1-101.

2.	Burda, Michael C. and Hunt, Jennifer (2001), From Reunification to Economic Integration: Productivity and the Labor Market in Eastern Germany, Brookings Papers for Economic Activity, Issue 2.

3.	Collier, Irwin L. (1986), Effective Purchasing Power in a Quantity Constrained Economy: An Estimate for the German Democratic Republic, Review of Economics and Statistics, 58(1), 24-32.