Since the inequality of earnings in East Germany has approached West German levels in the
late 1990s, the standard Roy model predicts that a positive selection bias of East-West
migrants should disappear. Using a switching regression model and data from the IABemployment
sample, we find however that employed East-West migrants remain positively
self-selected with respect to unobserved abilities. This result is consistent with the predictions
of our extended Roy model which considers moving costs that are negatively correlated with
labour market abilities of individuals. Moreover, we find that wage differentials as well as
differences in employment opportunities are the central forces which drive East-West
migration after unification.
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