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Changes in the Structure of Earnings During the Polish Transition

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Author Info
Keane, Michael P. (Yale University)
Prasad, Eswar S. () (International Monetary Fund and IZA Bonn)

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Abstract

We document changes in the structure of earnings during the economic transition in Poland. We find that inequality in labor earnings increased substantially from 1988 to 1996. A common view is that the reallocation of workers from a public sector with a compressed wage distribution, to a private sector with much higher wage inequality, accounts for the bulk of increased earnings inequality during transition. However, our decomposition of the sources of the increase in inequality suggests that this compositional effect accounts for only 39% of the increase. Fully 52% of the increase is due to the increase in the variance of wages within sectors. That is, earnings inequality within both the private and public sectors grew substantially, and by similar amounts. This illustrates how even state-owned enterprises in Poland moved towards competitive wage setting as they restructured. A substantial part of the increase in earnings inequality was between group, due largely to increased education premia. However, changes in inequality within education-experiencegender groups account for about 60 percent of the increase in overall wage inequality--similar to the patterns observed in the U.S. and U.K. in the 1980s. But, in contrast to the U.S. and U.K. experiences, increases in within-group inequality in Poland were very different across skill groups, with much larger increases for highly educated workers. These patterns hold in both the private and public sectors, although increases in education premia were somewhat greater in the private sector.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 496.

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Length: 60 pages
Date of creation: May 2002
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Handle: RePEc:iza:izadps:dp496

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Related research
Keywords: wage inequality; between and within-group inequality; education and experience premia; labor reallocation; transition;

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes
P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Aghion, Philippe & Howitt, Peter & Violante, Giovanni L, 2000. "General Purpose Technology and Within-Group Inequality," CEPR Discussion Papers 2474, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Acemoglu, Daron, 2002. "Directed Technical Change," Review of Economic Studies, Blackwell Publishing, vol. 69(4), pages 781-809, October.
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Cited by:
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  1. Nauro F. Campos & Dean Jolliffe, 2002. "After, Before and During: Returns to Education in the Hungarian Transition," William Davidson Institute Working Papers Series 475, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  2. Myck, Michal & Nicinska, Anna & Morawski, Leszek, 2009. "Count Your Hours: Returns to Education in Poland," IZA Discussion Papers 4332, Institute for the Study of Labor (IZA). [Downloadable!]
  3. John FitzGerald, 2004. "Lessons from 20 years of Cohesion," Papers WP159, Economic and Social Research Institute (ESRI). [Downloadable!]
  4. Marcos Chamon & Eswar Prasad, 2008. "Why are Saving Rates of Urban Households in China Rising?," NBER Working Papers 14546, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Newell, Andrew & Socha, Mieczyslaw W., 2005. "The Distribution of Wages in Poland, 1992-2002," IZA Discussion Papers 1485, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Michał Grajek, 2003. "Gender Pay Gap in Poland," Economic Change and Restructuring, Springer, vol. 36(1), pages 23-44, March. [Downloadable!] (restricted)
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  7. Andrew Newell & Mieczyslaw W. Socha, 2007. "The Polish Wage Inequality Explosion," IZA Discussion Papers 2644, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  8. Lukiyanova Anna, 2006. "Wage Inequality in Russia (1994–2003)," EERC Working Paper Series 06-03e, EERC Research Network, Russia and CIS. [Downloadable!]
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