Regional dynamics of employment, income and transfers: the hidden costs of the German unification (528)

Theme Track: Labour Markets - Employment Trends

Author:
Koller, Martin

The greater share of the unification costs has been imposed on the social security systems. Therefore the compulsary contribution and the non-wage costs were increased to a level which weakens german competitiveness and labour demand.

New data and methods give a very detailed picture of the last twelve years since the wall came down. There was a short blow up in the so-called unification boom and first considerable success in the transformation of eastern economy. This has been financed by a tremendous amount of transfers, which is quite unique in the European history. Up to now the gains of employment and income have not been sufficient to support the welfare system that we have grown fond of. Formerly economically strong regions and branches in Westgermany now are affected by high unemployment and loss of income. The ranking of "spenders" and "recipients" changes dramatically.

Commonly the redistibution of income and money by social systems is a very sublime and quiet one. This paper provides for the first time regional balances of income changes, state revenue, transfers by unemployment benefits, social aid and labour market policies - on NUTS 3 level. So the "quiet" system of financial adjustment becomes an open one - the need for reform too.

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