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Increased Sorting and wage Inequality in the Czech Republic: New Evidence Using Linked Employer-Employee Dataset

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Abstract

In this paper, we look at the evolution of firms’ wage structures using a linked employeremployee dataset, which has longitudinal information for firms and covers a large fraction of the Czech labor market during the period 1998-2006. We first look at the evolution of individual wage determination and find evidence of slightly increasing returns to human capital and diminishing gender inequality. We then document sharp increases in both within-firm and between-firm inequality. We investigate various hypotheses to explain these patterns: increased domestic and international competition, an increasingly decentralized wage bargaining, skill biased technological change and a changing educational composition of the workforce. We find some support for that all these factors have contributed to the changes in the Czech wage structure, and that increased sorting is strongly associated with the observed changes in wage inequality.

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  • Eriksson, Tor & Pytliková, Mariola & Warzynski, Frederic, 2009. "Increased Sorting and wage Inequality in the Czech Republic: New Evidence Using Linked Employer-Employee Dataset," Working Papers 09-5, University of Aarhus, Aarhus School of Business, Department of Economics.
  • Handle: RePEc:hhs:aareco:2009_005 Note: Published as: Eriksson, T., Pytlikova, M. and F. Warzynski (2013): "Increased Sorting and Wage Inequality in the Czech Republic: New Evidence Using Linked Employer-Employee Dataset." Economics of Transition (IF: 0.679), Vol. 21, Issue 2, pp. 357-380. DOI: 10.1111/ecot.12014.
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    Cited by:

    1. Kamil DYBCZAK & Kamil GALUSCAK, 2013. "Changes in the Czech Wage Structure: Does Immigration Matter?," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(2), pages 108-128, May.
    2. Håkanson, Christina & Lindqvist, Erik & Vlachos, Jonas, 2015. "Firms and Skills: The Evolution of Worker Sorting," Working Paper Series 1072, Research Institute of Industrial Economics.
    3. Parrotta, Pierpaolo & Pozzoli, Dario & Pytlikova, Mariola, 2010. "Does Labor Diversity Affect Firm Productivity?," Working Papers 10-12, University of Aarhus, Aarhus School of Business, Department of Economics.

    More about this item

    Keywords

    sorting; wage inequality; linked employer-employee dataset; firm panel data; Czech Republic;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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