Returns to Human Capital under the Communist Wage Grid and During the Transition to a Market Economy
Stephen M. Ross School of Business at the University of Michigan; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA); Gerald R. Ford School of Public Policy
University of Michigan - Stephen M. Ross School of Business; Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR)
IZA Discussion Paper No. 122
Under communism, workers had their wages set according to a centrally-determined wage grid. In this paper we use new micro data on men to estimate returns to human capital under the communist wage grid and during the transition to a market economy. We use data from the Czech Republic because it is a leading transition economy in which the communist grid remained intact until the very end of the communist regime. We demonstrate that for decades the communist wage grid maintained extremely low rate of return on education, but that the return increased dramatically and equally in all ownership categories of firms during the transition. Our estimates also indicate that men?s wage-experience profile was concave in both regimes and on average it did not change from the communist to the transition period. However, the de novo private firms display a more oncave profile than SOEs and public administration. Contrary to earlier studies, we show that men?s inter-industry wage structure changed substantially between 1989 and 1996.
Number of Pages in PDF File: 65
JEL Classification: P2, J3, J4working papers series
Date posted: October 26, 2000
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