No abstract

German separation in 1949 into a communist East and a capitalist West and their reunification in 1990 are commonly described as a natural experiment to study the enduring effects of communism. We show in three steps that the populations in East and West Germany were far from being randomly selected treatment and control groups. First, the later border is already visible in many socio-economic characteristics in pre-World War II data. Second, World War II and the subsequent occupying forces affected East and West differently. Third, a selective fifth of the population fled from East to West Germany before the building of the Wall in 1961. In light of our findings, we propose a more cautious interpretation of the extensive literature on the enduring effects of communist systems on economic outcomes, political preferences, cultural traits, and gender roles.

No abstract

This paper studies whether the decentralization of public employment services (PES) increases job placements among the unemployed. Decentralizing PES has been a widely applied reform used by governments aiming to enhance their efficacy. However, economic theory is ambiguous about its effects, and empirical evidence has been scarce. Using a difference-in-differences design, we exploit unique within-country variation in decentralization provided by the partial devolution of German job centers in 2012. We find that decentralization reduces job placements by approximately 10%. Decentralized providers expand the use of active labor market programs and monitoring strategies which diminish job seekers' reemployment prospects but shift costs to higher levels of government.