Working Paper

Minimum Wages and Employment: The Case of German Unification

Kiel Working Papers, 1045

Analysis in terms of the two-sector open economy shows that in bringing the market economy to East Germany, West Germany seems to have disregarded important fundamentals. Premature formation of a currency union led to a substantial real appreciation of the East German currency. Premature implementation of the West German system of wage bargaining resulted in inappropriate minimum wage schedules. Both measures made East German production possibilities and employment decline.


Bernhard Heitger


Publication Date
JEL Classification
E24, P23