The Geography of Worker-Firm Sorting: Drivers of Rising Colocation
Nils Torben Hollandt, Steffen Müller
IWH Discussion Papers,
No. 22,
2025
Abstract
Spatial segregation of low- and high-wage workers is a persistent economic issue with broad social implications. Using social security data and an AKM wage decomposition, this paper examines spatial wage inequality in West Germany. Spatial inequality in log wages rose sharply between 1998 and 2008, mainly due to increased variance in worker pay premiums across regions (48%) and stronger positive spatial assortative matching of workers and establishments (40%), i.e. colocation. Changes in establishment wage premia are mostly unrelated to rising colocation whereas labor mobility even reduced it. Instead, growth in worker pay premiums among stayers was concentrated in regions where high-wage workers and high-wage establishments were overrepresented already in the 1990s and, thus, magnified pre-existing colocation leading to ‘colocation without relocation’. Germany’s rising trade surplus, especially with Eastern Europe, boosted stayers’ worker pay premiums in those ex-ante high-wage regions and fully explains rising colocation.
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25.09.2025 • 29/2025
Fiscal policy will stimulate the East German economy next year – Economic Forecast Fall 2025 for the East German economy
In 2025, the economy in East Germany, as in Germany as a whole, is likely to do little more than stagnate. In the coming year, fiscal policy measures will stimulate the economy, but their effects are likely to be somewhat weaker than in Germany as a whole. The Halle Institute for Economic Research (IWH) expects the expansion rate of the East German economy in 2025 to be at 0.3%, slightly higher than that of Germany as a whole (0.2%). In both following years, it will rise to 1.1% and 1.2% respectively, which is slightly less than in the west.
Oliver Holtemöller
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10.04.2025 • 14/2025
In East Germany, as in the west, the economy is in crisis - Implications of the Joint Economic Forecast Spring 2025 and new data for the East German economy
In 2024, the economy in East Germany shrank by 0.1% and in Germany as a whole by 0.2%. The Halle Institute for Economic Research (IWH) expects stagnation for East Germany in 2025 and growth of 1.1% in 2026. According to the IWH forecast, the unemployment rate is expected to be 7.8% in both 2025 and 2026, after 7.5% in 2024.
Oliver Holtemöller
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Media Response
Media Response January 2026 Oliver Holtemöller: Das dritte schlechte Jahr in: Süddeutsche Zeitung, 16.01.2026 Steffen Müller: «Beaucoup de vieilles entreprises doivent sortir du…
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Alumni
IWH Alumni The IWH maintains contact with its former employees worldwide. We involve our alumni in our work and keep them informed, for example, with a newsletter. We also plan…
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Macroeconomic Reports
Macroeconomic Reports Local and global: IWH regularly provides current economic data – be it about the state of the East German economy, the macroeconomic development in Germany…
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Archive
Media Response Archive 2021 2020 2019 2018 2017 2016 December 2021 IWH: Ausblick auf Wirtschaftsjahr 2022 in Sachsen mit Bezug auf IWH-Prognose zu Ostdeutschland: "Warum Sachsens…
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East Germany
The Nasty Gap 30 years after unification: Why East Germany is still 20% poorer than the West Dossier In a nutshell The East German economic convergence process is hardly…
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Box 3.6.: Place-based industrial policies and credit markets: Evidence from the former East and West
Aleksandr Kazakov, Michael Koetter
EBRD Transition Report 2024-25,
December
2024
Abstract
The Transition Report 2024-25 focuses on industrial policies in the EBRD regions and beyond. Such policies have seen a resurgence, seeking to address market failures such as environmental degradation. However, their track record is mixed. Their growing popularity is shaped primarily by domestic political economy considerations and rising geopolitical tensions. While industrial policies are typically employed by higher-income economies, they are also now used more frequently in economies with less administrative and fiscal capacity to implement them.
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Research Clusters
Three Research Clusters Each IWH research group is assigned to a topic-oriented research cluster. The clusters are not separate organisational units, but rather bundle the…
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