Returns to Human Capital Under the Communist Wage Grid and During the Transition to a Market Economy

65 Pages Posted: 26 Oct 2000

See all articles by Katherine Terrell

Katherine Terrell

Stephen M. Ross School of Business at the University of Michigan; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Gerald R. Ford School of Public Policy

Daniel Munich

CERGE-EI, joint workplace of the Charles University and Academy of Sciences of the Czech Republic

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA; CEPR; IZA; CERGE-EI; University of Ljubljana

Date Written: March 2000

Abstract

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.

JEL Classification: P2, J3, J4

Suggested Citation

Terrell, Katherine and Munich, Daniel and Svejnar, Jan, Returns to Human Capital Under the Communist Wage Grid and During the Transition to a Market Economy (March 2000). Available at SSRN: https://ssrn.com/abstract=224229 or http://dx.doi.org/10.2139/ssrn.224229

Katherine Terrell (Contact Author)

Stephen M. Ross School of Business at the University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Gerald R. Ford School of Public Policy ( email )

735 South State Street, Weill Hall
Ann Arbor, MI 48109
United States

Daniel Munich

CERGE-EI, joint workplace of the Charles University and Academy of Sciences of the Czech Republic ( email )

Politickych veznu 7
Prague 1, 11121
Czech Republic
+420 224005175 (Phone)
+420 224 227 143 (Fax)

HOME PAGE: http://www.cerge-ei.cz

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA ( email )

420 West 118th Street
New York, NY 10027
United States

CEPR

London
United Kingdom

IZA

P.O. Box 7240
Bonn, D-53072
Germany

CERGE-EI

P.O. Box 882
7 Politickych veznu
111 21 Prague 1, Prague
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

University of Ljubljana ( email )

Dunajska 104
Ljubljana, 1000
Slovenia

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