Economic Transformation and the Revaluation of Human Capital - Hungary, 1986-1999

Budapest Labour Market Working Paper No. BWP 2001/4

37 Pages Posted: 3 Oct 2001

See all articles by Janos Kollo

Janos Kollo

Hungarian Academy of Sciences (HAS) - Research Centre for Economic and Regional Studies (HAS); IZA Institute of Labor Economics

Gábor Kertesi

Budapest University of Economic Sciences and Public Administration - Department of Microeconomics

Date Written: June 2001

Abstract

The paper analyzes the evolution of relative wages using individual wage data, and the contribution of skills to productivity using firm-level information from Hungary, 1986-99. Its main conclusion is that skills obsolescence was, and still is, an important aspect of post-communist transition. The data suggest a general rise in the returns to education between 1989 and 1992. This, the paper argues, was just a mirror image of the collapse of demand for unskilled labor in a period of deep crisis when technological change was minimal, and the forces of the market just started to work. When market institutions were already at work, and modern technologies were implemented on a massive scale, the general appreciation of education stopped but the returns to experience continued to decline. Young and educated workers are paid increasing wages, and their skills are estimated to yield higher productivity returns, especially in a modern environment. By contrast, neither productivity nor wages grew for the older cohorts of educated workers after 1992.

Keywords: labor market, employment, unemployment, wages, human capital

JEL Classification: J0, J6

Suggested Citation

Köllõ, János and Kertesi, Gábor, Economic Transformation and the Revaluation of Human Capital - Hungary, 1986-1999 (June 2001). Budapest Labour Market Working Paper No. BWP 2001/4, Available at SSRN: https://ssrn.com/abstract=285913 or http://dx.doi.org/10.2139/ssrn.285913

János Köllõ (Contact Author)

Hungarian Academy of Sciences (HAS) - Research Centre for Economic and Regional Studies (HAS) ( email )

Labour Research Department
Budapest H-1112
Hungary
(36-1)309-2654 (Phone)
(36-1)319-3151 (Fax)

IZA Institute of Labor Economics

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

Gábor Kertesi

Budapest University of Economic Sciences and Public Administration - Department of Microeconomics ( email )

H-1093 Budapest
Hungary
(36-1)216-7218 (Phone)
(36-1)216-7218 (Fax)

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