In this paper, we look at the evolution of the Czech labor market, and its wage structure in particular, using a linked employer-employee dataset covering a large fraction of the Czech labor market over the period 1998-2006. Estimating conventional earnings equations we find evidence of diminishing gender inequality, decreased returns to human capital, especially to education. Moreover, exploiting the linked employer-employee character of the data set, we document changes in within-firm wage dispersion and short-term variations around a constant level of between-firm dispersion. Next, we investigate various hypotheses related to transition towards a market economy, increased domestic and international competition and an increasingly decentralized wage bargaining to explain these patterns. We find some support for that the three mechanisms - increased international competition, further marketisation and decentralized wage setting - all have contributed to the changes in the Czech wage structure.
Wage inequality; Transition countries; Linked employer-employee data
Main Research Area:
Four-Year Membership of Central and Eastern European Countries in the European Union: the effects and new calls for the national and regional labour markets, 2008