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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)

Abstract

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.

Suggested Citation

  • Gabor Kertesi & Janos Kollo, 2002. "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," Budapest Working Papers on the Labour Market 0205, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:bworkp:0205
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    References listed on IDEAS

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    1. Grant, James H & Hamermesh, Daniel S, 1981. "Labor Market Competition among Youths, White Women and Others," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 354-360, August.
    2. Jan Rutkowski, 1996. "High skills pay off: the changing wage structure during economic transition in Poland," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(1), pages 89-112, May.
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    Cited by:

    1. World Bank, 2004. "Serbia and Montenegro : An Agenda for Economic Growth and Employment," World Bank Publications - Reports 14487, The World Bank Group.
    2. Klara Foti, 2005. "The impact of changes in competitiveness on labour market and human resource development, the case of Hungary," IWE Working Papers 154, Institute for World Economics - Centre for Economic and Regional Studies.
    3. 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.
    4. Fazekas, Karoly, 2004. "Low participation and regional inequalities : interrelated features of the Hungarian labour market. Case study," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 37(4), pages 375-392.
    5. Fazekas, Károly, 2005. "Transition of the Hungarian Labour Market: Age, Skill and Regional Differences," Discussion Paper 241, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    6. Marit Hinnosaar & Tairi Room, 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.
    7. World Bank, 2007. "Bulgaria - Accelerating Bulgaria's Convergence : Volume 2. The Challenge of Rasing Productivity," World Bank Publications - Reports 7876, The World Bank Group.
    8. Ádám Bereczk, 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.
    9. Fazekas, Karoly, 2004. "Low participation and regional inequalities : interrelated features of the Hungarian labour market. Case study," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 37(4), pages 375-392.
    10. 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, vol. 0, pages 115-130, February.
    11. Hajnalka Tarjani, 2005. "Estimating some labour market implications of skill biased technology change and imports in Hungary," CERS-IE WORKING PAPERS 0508, Institute of Economics, Centre for Economic and Regional Studies.

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