The speed of leaving the old job: a study on job changes and exit into unemployment during the East German transition process

The first period of the transition to a market economy was characterised by a high rate of job-change in many transition countries. This was no different for East Germany. This paper analyses the consequences of the transition process for East German workers in their old job. We quantify the speed at which they change their jobs for a new one or enter unemployment by studying a sample of job spells drawn form the German Socio-Economic Panel-East. The study focuses the period from July 1990 to December 1993, thus a period after the introduction of the German Economic, Monetary, and Social Union. We estimate the effects of important covariates on the transition rates from the old job into a new and into unemployment by a standard competing-risks duration model. Our results suggest that the speed of exit into new jobs rises with skills. We also find that old firms managed to keep workers with relatively good job matches. The special short-time allowances, a labour market program that was in force until the end of 1991, slowed down the exit rate into unemployment prior to its end. We find that workers increased their rate of job-change temporarily at around the period in which this program ended.