The Eastern German Labor Market in Transition: Gross Flow Estimates from Panel Data

Abstract

This paper investigates the behavior of the eastern German labor market during the initial stages of the transition to a market economy, using information contained in a unique longitudinal survey of eastern German residents taken between November 1990 and November 1991. The study utilizes Markovian flow analysis of worker transitions between labor market states. Steady-state predictions confirm that the labor market will undergo substantial contraction before stabilizing and that job creation will be dominated by the emerging service sector. Multinomial logistic estimates suggest that standard methodologies can have a useful role in the analysis of labor markets in transition. J. Comp. Econom., April 1995, 20(2), pp. 139-170. Institute for Employment Research, Nuremberg; London Business School and Centre for Economic Performance, London School of Economics; Ifo Institute for Economic Research and Centre for Economic Performance, London School of Economics; Centre for Economic Performance, London School of Economics.