Labour Demand with Heterogeneous Labour Inputs after the Transition in Hungary, 1992-1999 - and the Potential Consequences of the Increase of Minimum Wage in 2001 and 2002 (original) (raw)
Related papers
1996
This paper presents error correction estimates of a simple interdependent model of the labour market using monthly data over 1990-1994 for the industrial sector in Poland and Hungary. The aim is to investigate three issues in the performance of labour markets during transition. First, is there a stable labour market equilibrium or do high unemployment rates across the region indicate hysteresis? Second, has the intensity of employment adjustment increased with progress in institutional reforms that strengthened corporate governance at the enterprise level? Third, what governs the evolution of real wages and to what extent is there evidence for strong insider power in the labour market? The results reveal striking differences between Poland and Hungary. The former exhibits hysteresis and evidence for considerable insider power while the latter has experienced adjustment towards a stable labour market equilibrium. The intensity of adjustment, however, is high in both countries over the sample period and fails to respond to the initiation of institutional reforms.
We explore the relative productivities and wages of worker groups over a 20 year period following the transition in Hungary. Due to the economic transition, firms may have become more efficient in terms of setting wages, relative productivities and wages would converge over time. The linked employer-employee dataset allows us to control for selection bias at the occupation, firm, region, and industry level, and to assess long-term trends. The results do not suggest that firm wage setting became more efficient: we find a persistent gap between the relative wages and productivities of both the high-skilled and older workers. Firms who entered the market after the transition set wages more efficiently than older firms.
2002
Hungary has been a front-runner in the transition to capitalism. It has also experienced exceptionally radical changes in employment and relative wages. One main feature of these changes is an enormous increase in the returns to skill. This paper argues that it is instructive to divide the process into two periods, divided by around the year 1995. The first period experienced major destruction of low-skilled jobs and large inter-sectoral reallocation, partly toward skill-intensive industries. Employment started to rebound in the second period, which has also seen a pervasive skill upgrade in all sectors. The skill premium in earnings started to grow even faster in the second stage because increasing demand for skill met a more and more inelastic supply in the short run. Long-run supply effects have been, however, strong as college enrollment rates soared. Introduction of new (foreign) capital seems to be a major factor behind increasing demand for skill. Foreign direct investment into Hungary was by far the largest among the transition countries until the late 1990's, but other Central-Eastern European countries started to catch up since. This suggests that the Hungarian experience might be helpful to predict labor market trends in other transition economies, especially those that attract significant foreign capital.
Transition of the Hungarian labour market–age, skill and regional differences
PIE Discussion Paper Series, 2005
The system change has been accompanied by large scale redundancies, massive and frequently long-term unemployment, a high level of inactivity and growing income and regional disparities in Hungary. Transition has its winners and losers both in terms of economic activity and wages. The paper describes the role of three factors: age, skill, and location shaping labour market differences during three phases of transition. In the first part of the paper, impact of transition on the Hungarian labour market has been discussed. In the second part we investigate the evolution of age and skill related differences on the labour market. In the third part regional differences will be discussed. Section four concludes and discusses policy options available to reduce labour market disparities in the following years.
Long-run trends in earnings and employment in Hungary, 1972-1996
2000
Transition from socialist to capitalist economy led to enormous changes in earnings and employment. In our study a long-horizon descriptive analysis is presented about the major trends, including the last fifteen years of socialism. Education, gender, calendar time, age and vintage effects are separately analyzed. Aggregate (quasi-) panel analysis is used to assess the role of labor demand and labor supply, concluding that exogenous supply factors explained most of what happened before the transition, while the transition itself was dominated by large labor demand shocks. These demand shocks are in large part structural, as opposed to cyclical, and are highly correlated with vintage, gender and education. The main results are summarized in a list of stylized facts.
An Estimation of the Productivity-Wage Gap in Hungary 1986-2005
2009
In this paper we seek to provide new empirical evidence on the relative productivities and wages of various worker groups (by gender, age, and education), based on longitudinal matched employer-employee data from Hungary covering 1986-2005. We estimate the productivity and wage gaps from firm-level production functions and wage equations, using firm-level data on productive inputs and output, wage costs, and the demographic composition of the work force obtained from the linked worker data. This methodology allows us to assess whether productive differences can account for the wage gaps between worker groups, as well as the evolution of these gaps following the transition to a free market.
Firm behavior and the labor market in the Hungarian transition
The authors describe the main changes in the Hungarian labor market since 1989. They focus especially on changes in behavior in state and privatized firms, since the shedding and restructuring of labor are at the heart of the transition. They describe five types of firms: 1) state firms (often in bad shape and/or natural monopolies); 2) firms privatized by insiders; 3) firms privatized by outside (but domestic) investors; 4) new small-scale ("de novo") private firms. The state and de novo firms are increasingly outside the tax system - the state firms by de facto tax exemptions, the de novo firms through tax evasion. As the de novo sector grows, the effective tax yield will tend to fall, shifting the tax burden to the other three types of firms. Subsidizing the growth of the private sector may have been desirable initially, but it is dynamically undesirable. It is important to change the distribution of the tax burden, while setting tax rates that enhance the growth of lab...