1984. The panel used in this paper spans the years 1985 to 1996 because information on
workers mobility is not available in 1984. Since the period covers the German reunification, I
have excluded data on the former East German population to keep the pre and post unification
samples comparable.
The GSOEP is unique for the analysis hereafter because it provides information on move-
ments between and within firms through a question about changes in the worker’s employment
situation in the previous year. Most importantly, there is detailed information on the rank
occupied by the worker within his current occupation. These two pieces of information are
central to the study of wage and mobility dynamics within the firm. Another advantage is
that information is collected over a large sample of individuals and therefore, the analysis of
wage dynamics and intra-firm mobility can be done for a large sample firms (although survey
data do not provide as many details about firm characteristics as for individuals).
3.1 Variable and Data Selection
The GSOEP provides information on individual characteristics such as age, education, sex,
marital status, nationality and employment status. Wages are given on a monthly basis,
corresponding to the month preceding the time of the survey. 13
Firm characteristics include the type of industry, whether the firm belongs to the public
sector, firm size and the duration of the employment contract (unlimited or limited length).
Information about unionization is not available on a longitudinal basis as the question is asked
only twice over the sample period (1989 and 1993). Although I cannot control for the presence
of unions, the variable indicating whether individuals work in a public or private sector firm
should partially pick up differences in wage policies between unionized and non unionized
firms. Moreover, given that unions have a predominant impact in the German economy at
the industry and national level, controlling for treatment differences for unionized and non-
unionized workers across firms is not as critical as it would be in an economy where both play
a significantly different role at the firm level.
I have selected individuals aged between 20 and 65 who are working at the time of the
survey on a full-time basis. I have excluded self-employed workers and put a restriction on
wages excluding any observations below 500 DM per month. 14 The resulting sample contains
13 I used wages after deductions for tax and social security because it is the earning variable most frequently
reported.
14 Since in Germany, the minimum wage varies by industry, this bound should give a reasonable minimum in
13