Earnings Assimilation of Post-Unification East German Migrants in West Germany - the Role of Cultural Similarity

An immigrant-native wage gap can result from various mechanisms. This paper studies the relevance of cultural similarity. We investigate the wage assimilation of East Germans who migrated to West Germany after unification (1990-1999). We compare their wage assimilation to that of international immigrants to West Germany who arrived at the same time. The analysis uses administrative as well as survey data. The results suggest that even conditional on age and education East Germans faced significant initial earnings disadvantages in West Germany. However, these disadvantages were smaller than those of international immigrants which supports a beneficial role of cultural similarity. The earnings gap relative to West German natives narrowed over time for all immigrants. The findings are robust to controlling for potentially endogenous return migration and labor force participation. Controls for fixed effects reveal that positive assimilation for East German as well as international immigrants was concentrated among highly educated immigrants