III. Data and Sample Characteristics
A. Data
To examine the impact of reunification and socioeconomic characteristics on the life satisfaction of East and West German residents, we use data from the German Socio-
Economic Panel GSOEP. The GSOEP is a nationally representative panel that has closely followed around 13,500 individuals living in some 7,000 households each
year since 1984.
6
In 1990, the panel was extended to include residents of the former East Germany. The focus of this paper is the men and women, aged 21–64, who
resided in East or West Germany, which we follow from 1985–99 for West Germans and 1991–99 for East Germans.
7
In order to establish the potential welfare benefit of moving from the East to the West following reunification, we also include “movers” to the West in the Eastern data
276 individuals. Similarly, we observe 80 individuals who moved from the West to the East over the period, which we have added back into the Western samples in order
to estimate the effect of moving. The total samples we use therefore consist of 25,903 person-year observations 12,592 males; 13,311 females on East Germans, and
108,738 person-year observations 54,603 males; 54,135 females on West Germans. This corresponds to repeated observations on just over 4,100 Eastern and 14,250
Western individuals. The average length of time in the GSOEP is about 6.5 years. Given the length of the panel, only about 20 percent of West Germans are observed
in all 15 waves 1985-99, and around 41 percent of East Germans are observed in all waves between 1991 and 1999. More detail of sample attrition in the GSOEP can be
found in Pannenberg 2001, and we tackle this potential problem in the decomposi- tion methodology presented in Section IV. As the data span almost a decade, all
income information has been deflated by the OECD main economic indicators con- sumer price index Base Year 1995.
B. Life Satisfaction in East and West Germany
The dependent variable we use in this analysis is based on the question, “How satis- fied are you at present with your life, all things considered?” The response runs from
0 completely dissatisfied to 10 completely satisfied. Figure 1 highlights the change in average levels of life satisfaction for the pooled
sample of males and females separately for East and West Germans. The figure shows a number of interesting patterns. Firstly, life satisfaction in the East was always
observed to be significantly below that of the West in each year following reunifica- tion. Secondly, the immediate period after the falling of the Berlin Wall 1990 saw a
6. In this paper we use the German version of the GSOEP data See Haisken-DeNew and Frick 2000, for details, although the same analysis can be conducted with the international “scientific use” version, albeit
with around 5 percent fewer observations. 7. In the econometric models we do not include the first year of the panel 1984 for West Germans; 1990
for East Germans as that year is used to create the “major life-event” lagged variables, and the derived household measure we use is calculated using information on all sources of household income gained over
the previous 12 months. However, the 1984 data West and the 1990 data East are included in Figure 1 and the calculations in Table 1.
The Journal of Human Resources 654
Frijters, Haisken-DeNew, and Shields 655
Figure 1 Average Life Satisfaction for East and West Germans
relatively high level of life satisfaction reported by East Germans 6.56, reflecting the general “elation” felt by the population Bach and Trabold 2000. However,
this initial “elation” appears to have quickly dissipated, with average life satisfac- tion falling by around 0.60 by 1991. Thirdly, in the years between 1991 and 1999
East Germans experienced a steady increase in their life satisfaction. Fourthly, in comparison to East Germans, life satisfaction in West Germany remained fairly
constant between 1984 and 1999. If anything, there was a very gradual decline in life satisfaction in the West between 1984 and 1999; however, there was a slight
peak in 1991 off-setting this trend. Finally, nearly a decade after reunification size- able life satisfaction differentials still existed between East and West Germans
around 0.60.
IV. Econometric Framework and Decomposition Approach
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