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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


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  • Gabor Kertesi


  • Janos Kollo

    (Institute of Economics, Hungarian Academy of Sciences)


The paper analyses changes in the demand for unskilled, young skilled, and older skilled workers during the post-communist transition in Hungary. Systems of cost share equations derived from the translog cost function are estimated for cross-sections of large firms observed in the period 1992-99. Following the 'transformational recession' the own-price elasticities of labour and capital were stabilized at levels observed in several developed market economies. Unskilled and skilled labour are estimated to be p-complements, and younger and older skilled workers p-substitutes. Capital and labour appear to be p-substitutes with unskilled labour having the highest elasticity of substitution. Further results hint at the existence of nonnegligible scale effects and the non-neutrality of technical change. The estimated wage elasticities give us the opportunity to evaluate consequences of some governmental policies. As minimum wage was doubled in nominal terms between 1999 and 2002 in Hungary it was evident to apply these results to this highly relevant issue. In the second part of the paper we try to evaluate the potential demand consequences of this. Based on the earnings distributions of the Wage Survey of 1999 (a large individual level data set) we make several predictions concerning these consequences.

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Bibliographic Info

Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series Budapest Working Papers on the Labour Market with number 0205.

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Length: 44 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:has:bworkp:0205

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Cited by:
  1. Marit Hinnosaar & Tairi Rõõm, 2003. "The impact of minimum wage on the labour market in Estonia: an empirical analysis," Bank of Estonia Working Papers 2003-8, Bank of Estonia, revised 12 Oct 2003.
  2. Gabor Korosi, 2002. "Labour Adjustment and Efficiency in Hungary," Budapest Working Papers on the Labour Market 0204, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  3. Hajnalka Tarjani, 2005. "Estimating some labour market implications of skill biased technology change and imports in Hungary," IEHAS Discussion Papers 0508, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  4. Lars Calmfors & Giancarlo Corsetti & John Hassler & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Ákos Valentinyi & Xavier Vives, 2012. "Chapter 5: The Hungarian Crisis," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 115-130, 02.
  5. World Bank, 2004. "Serbia and Montenegro : An Agenda for Economic Growth and Employment," World Bank Other Operational Studies 14487, The World Bank.
  6. World Bank, 2007. "Bulgaria - Accelerating Bulgaria's Convergence : Volume 2. The Challenge of Rasing Productivity," World Bank Other Operational Studies 7876, The World Bank.
  7. Ádám Bereck, 2013. "Output and Staff Number in Hungarian Manufacturing before, during and after the Crisis," Theory Methodology Practice (TMP), Faculty of Economics, University of Miskolc, vol. 9(02), pages 15-21.


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