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Wage Determination under Communism and in Transition: Evidence from Central Europe

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  • Basu, Swati

    () (McGill University)

  • Estrin, Saul

    () (London School of Economics)

  • Svejnar, Jan

    () (Columbia University)

Abstract

Using large firm-level data sets from the Czech Republic, Slovakia, Poland and Hungary, we show that the wage behavior of firms changed considerably as these economies launched their transitions to a market system. We find evidence of worker sharing in their enterprise rents and losses at the end of the communist period in some economies and within a year after the launching of the transition, we find rent sharing in all of them. Using the Czech and Slovak data we show that the state-owned enterprises (SOEs) that existed under communism and survived allow for less worker rent-sharing than other firms. We also test for the presence of a wage curve and with the exception of Slovakia we do not find a significant association between local unemployment and wages. Finally, we do not find significant effects of firm ownership on wages.

Suggested Citation

  • Basu, Swati & Estrin, Saul & Svejnar, Jan, 2004. "Wage Determination under Communism and in Transition: Evidence from Central Europe," IZA Discussion Papers 1276, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1276
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    References listed on IDEAS

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    1. repec:cor:louvrp:-12 is not listed on IDEAS
    2. Svejnar, Jan, 1986. "Bargaining Power, Fear of Disagreement, and Wage Settlements: Theory and Evidence from U.S. Industry," Econometrica, Econometric Society, pages 1055-1078.
    3. Ransom, Michael R., 1987. "A comment on consumer demand systems with binding non-negativity constraints," Journal of Econometrics, Elsevier, pages 355-359.
    4. Olivier Blanchard & Michael Kremer, 1997. "Disorganization," The Quarterly Journal of Economics, Oxford University Press, pages 1091-1126.
    5. Anders Åslund & Peter Boone & Simon Johnson, 1996. "How to Stabilize: Lessons from Post-communist Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 217-314.
    6. Brown, James N & Ashenfelter, Orley, 1986. "Testing the Efficiency of Employment Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 40-87, June.
    7. Prasnikar, Janez, et al, 1994. "Behavior of Participatory Firms in Yugoslavia: Lessons for Transforming Economies," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 728-741, November.
    8. ZELLNER, Arnold & KMENTA, Jan & DREZE, Jacques H., 1966. "Specification and estimation of Cobb-Douglas production function models," CORE Discussion Papers RP 12, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Dobbelaere, Sabien, 2004. "Ownership, firm size and rent sharing in Bulgaria," Labour Economics, Elsevier, vol. 11(2), pages 165-189, April.
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    Cited by:

    1. Ales Berk, 2006. "Determinants of Leverage in Slovenian Blue-Chip Firms and Stock Performance Following Substantial Debt Increases," Post-Communist Economies, Taylor & Francis Journals, vol. 18(4), pages 479-494.
    2. Maxim Bouev, 2005. "State Regulations, Job Search and Wage Bargaining: A Study in the Economics of the Informal Sector," William Davidson Institute Working Papers Series wp764, William Davidson Institute at the University of Michigan.
    3. Bernd Görzig & Martin Gornig & Axel Werwatz, 2006. "Firm Specific Wage Spread in Germany - Decomposition of regional differences in inter firm wage dispersion," SFB 649 Discussion Papers SFB649DP2006-045, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

    More about this item

    Keywords

    wages; rent-sharing; transition economies;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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