Skills, Wages, and Employment in East and West Germany

Disaggregated data from 30 two-digit manufacturing industries in the east and west parts of unified Germany are used to estimate employment for three skill categories of blue collar workers. Employment elasticities are uniformly higher in the east, and for unskilled labor. The former result contradicts union claims that wages had little relevance for east German job losses, while the latter confirms the capital-skill complementarity hypothesis.