The Caring Hand that Cripples: The East German Labor Market after Reunification (Detailed Version)

By Dennis J. Snower, C. Merkl. Social Science Research Network, 2006

112 citations recorded by the source corpus.

The East German labor market has hardly made any progress since German reunification, despite massive migration flows and support from the West. We argue that East Germany is in trouble precisely because of the support it has received. This paper explores the phenomenon of "the caring hand that cripples," arising from bargaining by proxy, the adoption of the West German welfare system and the associated employment persistence. Even the steady decrease of labor cost (normalized by productivity) since the beginning of the nineties did not help to kick start the East. We suggest that labor force participants fell into "traps," concerning low skills, ageing of the workforce, labor-saving capital and skills, capital underutilization, and unemployment arising from the decline of the tradeable sector.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/a6b8cba6075db7f6bd26571ed14920ca1107751d

Citations in the corpus

• Does Democracy Foster Trust? (2009, unknown): “For example, the unemployment rate in East Germany almost doubled between 1991 and 2004 from around 10 percent to 20 percent (Snower and Merkl 2006).”