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Ownership and Wages: Estimating Publi-Private and Foreign-Domestic Differentials with LEED from Hungary, 1986 to 2003

In: The Analysis of Firms and Employees: Quantitative and Qualitative Approaches

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  • John S. Earle
  • Almos Telegdy

Abstract

Studies of public-private and foreign-domestic wage differentials face difficulties distinguishing ownership effects from correlated characteristics of workers and firms. This paper estimates these ownership differentials using linked employer-employee data (LEED) from Hungary containing 1.35mln worker-year observations for 21,238 firms from 1986 to 2003. We find that ownership type is highly correlated with characteristics of both workers (education, experience, gender, and occupation) and firms (size, industry, and productivity), suggesting ownership type is systematically selected along these dimensions. The large unconditional wage gaps (0.24 for public-private and 0.40 for foreign-domestic) in the data are little affected by conditioning on worker characteristics, but controlling for industry reduces the public and foreign premia (to 0.16 and 0.34, respectively), and controlling for employment size further reduces them (to 0.07 and 0.28). We also exploit the presence of 3,700 switches of ownership type in the data to estimate firm fixed-effects and random trend models, accounting for unobserved firm characteristics affecting the average level and trend growth of wages. These controls have little effect on the conditional public-private gap, but they reduce the estimated foreign premium (to 0.07). The results imply that the substantial unconditional wage differentials are mostly, but not entirely, a function of differences in worker and firm characteristics, and that linked panel data are necessary to take these correlated factors into account.
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Suggested Citation

  • John S. Earle & Almos Telegdy, 2009. "Ownership and Wages: Estimating Publi-Private and Foreign-Domestic Differentials with LEED from Hungary, 1986 to 2003," Book chapters authored by Upjohn Institute researchers, in: Stefan Bender & Julia Lane & Kathryn Shaw & Fredrick Andersson & till von Wachter (ed.),The Analysis of Firms and Employees: Quantitative and Qualitative Approaches, pages 229-252, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:uchaps:jsechicago
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    Cited by:

    1. Sándor Csengödi & Dieter M. Urban, 2008. "Foreign Takeovers and Wage Dispersion in Hungary," CESifo Working Paper Series 2188, CESifo.

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    More about this item

    Keywords

    hungary; transition; wages; ownership;
    All these keywords.

    JEL classification:

    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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