In this paper, we examine the evolution of the changes in the wage structure in the Czech Republic using a linked employer-employee dataset covering a large fraction of the Czech labor market over the period 1998-2006. We find evidence of slightly diminishing gender inequality and increasing returns to human capital. Moreover, exploiting the firm panel character of the data set, we document changes in within-firm wage dispersion and between firm dispersion. We investigate various hypotheses: increased domestic and international competition, an increasingly decentralized wage bargaining, and a changing educational composition of the workforce to explain these patterns. Our results indicate that all these factors have contributed to the changes in the Czech wage structure, and that increased sorting and changes in the composition of firms' workforces are most strongly associated with the observed changes in wage inequality.
Wage inequality; Transition economies; Linked employer-employee data