Social Ties for Labor Market Access – Lessons from the Migration of East German Inventors

Social ties have been shown to be a major factor supporting economic transactions and thus are fundamental to understanding economic behavior. We study the impact of social ties on the migration of inventors from East to West Germany and labor market access, using the fall of the Iron Curtain as a natural experiment. Modeling migration to West German regions after 1990, we find that Western regions with stronger social ties across the former border attracted more inventors than did regions without such ties. However, the migration decisions of inventors with outstanding patenting track records were not affected by social ties. We conclude that the presence of social ties had a positive causal effect on labor market access of migrants while the dependence on social ties is substantially reduced for star performers.