Labor earnings and household income mobility in reunified Germany: A comparison of the eastern and western states

Using data from the German Socio-Economic Panel, we compare income mobility of persons from the eastern and western states of Germany between 1990 and 1995. We consider income mobility between consecutive years and between th e first and the final year of this time period. We find that gross individu al labor income mobility was much higher in the east than in the west durin g the first years after reunification, but that this difference has become much smaller until 1995. Changing to measures that reflect economic well-be ing more accurately, we observe that gross equivalent labor income mobility and net equivalent income mobility initially were also much higher in the eastern states than in the western states, but converged over time as well. This convergence has been particularly strong for net equivalent income mo bility, suggesting that the social protection system has greatly reduced mo bility risks associated with the transformation process in the eastern stat es of Germany.