Internal Migration in Regions of Germany: A Panel Data Analysis

The objectives of this paper are to examine the traditional determinants of interregional migration between regions of Germany after reunification in 1989. The period considered is 1993-95 as the high average migratory flows of the earlier period, 1989-92, had settled down to a level of about 12000 to 15000 per month by 1993. Wage convergence has taken place much more rapidly than the convergence in unemployment rates between regions of East and West Germany. Due to wage convergence we find that the relationship between regional wage differences and migration is non-linear. For white-collar workers the relationship is U-shaped while for the blue-collar workers, the relationship is inverted U-shape. The explanation for such a relationship lies in the ‘option theory of waiting’ and attitudes towards risk under wage convergence. While housing and infrastructure variables do play an important role at the margin, wage convergence can prevent the loss of human capital from East German regions to West Germany.