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Labor Market Effects in the German-Czech Border Region: An Empirical Study Using the IAB Employment Sample (IABS)

Michael Moritz, Margit Gröger


Using the IAB Employment Sample (IABS) covering 1980-2001, we investigate what impact the fall of the Iron Curtain has had on the skill structure of employment and wages in the western German districts neighboring the Czech Republic. The introduction of free trade and capital mobility in this region, which has one of the world's largest wage differentials, can be seen as a natural experiment. Even though full liberalization of the labor markets has not yet occurred, integration of product and capital markets should lead to significant shifts in economic activities. We presume that changes in skill and wage structures are particularly apparent in the regions situated immediately on the open border. Distinguishing three skill categories we obtain rather unexpected results. Though we observe a general shift from low-skilled jobs towards skilled jobs and a convergence trend of border regions towards the national average, we do not find a special effect for the period after the opening of the border, neither concerning the skill structure nor the wage differentials.

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Print ISSN: 0886-5655
Online ISSN: 2159-1229