Who Earns Their Keep? An Estimation of the Productivity-Wage Gap in Hungary 1986-2005

Anna Lov Sz () and Mariann Rig¢ ()
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Anna Lov Sz: Institute of Economics Hungarian Academy of Sciences
Mariann Rig¢: Central European University
Authors registered in the RePEc Author Service: Anna Lovasz

No 902, Budapest Working Papers on the Labour Market from Institute of Economics, Centre for Economic and Regional Studies

Abstract: 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. We take firm fixed effects into account to assess the role of selection at the firm level, and estimate the production function via the method of Levinson and Petrin to account for endogeneity of input choice. The results show that while there may be significant differences in productivities and wages between groups in the OLS specification, these mostly become insignificant within firms. We find that much of the fall in the value of skills obtained prior to the transition is due to selection of workers at the firm level.

Keywords: relative wage; relative productivity; quality of labor; production function; earnings equation (search for similar items in EconPapers)
JEL-codes: J24 J31 J71 (search for similar items in EconPapers)
Date: 2009-07
New Economics Papers: this item is included in nep-eff, nep-lab and nep-tra
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Citations: View citations in EconPapers (1)

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