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Redundant workers are significantly more likely to relocate if they have former colleagues in more prosperous destination regions. For example, a former colleague from eastern Germany who was now employed in western Germany increased the likelihood of a redundant worker relocating after reunification by 6 per cent. This is the result of a study published by the Rockwool Foundation Berlin (RFBerlin) on the occasion of the 35th anniversary of reunification.
‘This is the first causal evidence that former colleagues play a crucial role in mobility decisions during large-scale economic upheavals,’ says Jan Sebastian Nimczik of the European School of Management and Technology, one of the co-authors of the RFBerlin study.
‘The effect was specifically caused by former colleagues from the same professional field, not by general contacts at work or neighbours,’ adds Alexandra Spitz-Oener, co-author from Humboldt University in Berlin and vice-director of RFBerlin. "Our findings suggest that former colleagues promoted mobility because they passed on credible information about attractive jobs. Employees moved when they could realistically expect to be successful in the same environment as their former colleagues from the GDR.‘
Michelle Hansch, a researcher at RFBerlin and Humboldt University, says: ’Laid-off workers can make strategic location decisions, taking into account the specific characteristics of their former colleagues and the quality of employment opportunities at the destination."
Even in countries with well-developed labour market institutions and social safety nets, professional networks can fill information gaps that formal systems cannot close. Therefore, a more targeted approach to labour market counselling could help. This does not seem unrealistic in the age of artificial intelligence, where recommendation systems can systematically process the information and experiences of similar users and use them for recommendations.
The study shows that mobility from eastern to western Germany was surprisingly low after a brief peak at the time of reunification. Only 3.6 per cent of workers who were laid off between 1992 and 2005 moved from eastern Germany to western Germany, while 96.4 per cent remained in the east in the five years after their dismissal. ‘This pattern may seem surprising, as former GDR citizens had access to the entire German labour market and, compared to international migration, there were no language or cultural barriers. In addition, real wages in the West were about 12 per cent higher and job security was also greater,’ adds Spitz-Oener. However, studies from around the world have shown that migration depends not only on economic factors, but also on other factors, such as roots in the home region or uncertainty about the usability of one's qualifications in the new country.
In 1989 and again in 1990, around 400,000 of the 16.4 million East Germans moved to West Germany. Then the number fell to 250,000 in 1991 and even further to 150,000 in 1992. This remained the case for the rest of the 1990s.
The study is based on a novel data set that combines administrative data from the GDR with employment data from the period after reunification. The analysis covers the entire labour market biographies of almost all GDR workers during the dramatic economic transformation from 1989 to 2005.
Prof. Alexandra Spitz-Oener; aso@rfberlin.com; 0049 171 205 41 32
Prof. Jan Sebastian Nimczik; jan.nimczik@esmt.org; 0049 30 212 31 15 55
Dr. Michelle Hansch; mih@rfberlin.com; 0049 176 43 27 41 85
www.rfberlin.com/25077.pdf
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