The impact of privatization and change of social security systems upon living conditions of east German households

Abstract

After the collapse of the communist regime East Germany became the prime example of a 'Big Bang' strategy of transformation. Rapid marketization and privatization brought about a disastrous economic downturn. But immense transfer payments from West Germany and the import of a well-developed system of social security institutions accompanied the transformation, minimizing social costs. This article summarizes the main developments and analyzes their impact on the living conditions of East German households. The indicators presented cover labour force participation, business activities and economic inactivity in the household context; relative income position, poverty, income inequality and the self-assessment of income changes; consumption and livelihood. The article reveals both the different experiences of gains and losses within East German society and the (in some respects) advantageous position of East German households compared with households in Hungary, Poland, and the Czech and Slovak Republics.