Changes in the Distribution of Pre-Government and Post-Government Income in Germany 1973 – 1993

Abstract

During the two decades from 1973 to 1993, Germany underwent far-reaching economic and political changes. 1973 was the last year of full employment, with an unemployment rate of just 1.2%, while in 1993 unemployment in the western part of Germany had risen to 8.2%. In 1989 the Berlin wall was tom down and in mid-1990 the Federal Republic of Germany and the German Democratic Republic founded a monetary union. In Oetober 1990, with German reunifieation, the West German legal system, including the regulations for the labor market as well as the entire tax and transfer system, was implemented in East Germany3, and federalism was introduced in the former German Democratic Republic through the formation of several new Lander. West Germany paid high transfers to East Germany amounting to up to 5% of West German GDP per year4; these transfers will continue for many years to come.