The income of socialist upper classes during the transition to capitalism: Evidence from longitudinal East German data

We use data from the East German sample of the German Socio-Economic Panel (GSOEP) to examine the incomes of privileged individuals during the transition from socialism to capitalism. The standard measure of elite status is party membership, but this measure is likely to be inaccurate. Instead we identify the upper class by the ownership of a telephone before the fall of the Berlin Wall. We find that the relative incomes of those who had telephones has been consistently higher during the transition compared to those who did not, and the effect remains even after controlling for ability to the greatest extent possible in the data. This upper-class advantage has grown as the transition to free markets has continued. (C) 1998 Academic Press.