Inequality in Income: A Comparison of East and West Germans before Reunification and during Transition

Abstract

This article analyses the income distribution of East Germany at the time of reunification with West Germany, the pertod 1990 to 1993. Using data from the German Socio-Economic Panel Study (GSOEP), we compare the situ ation in East Germany on the eve of the union to that in West Germany. We then analyse the change of relative income positions of certain social groups — such as lone-parent households and the aged - in the three years following reunification. The article also provides a dis cussion of the measurement problems that arise when comparing income distributions across nations and across time. The data proves that the general income distribution in East Germany — starting from a very low level of inequality — is slowly approaching West German standards. It appears that persons in similar socio-demographic groups are in com parable relative income positions in both regions. In East Germany unemployment is of increasing importance as a source of decline in economic well-being.