We would like to thank Pavel Mrazek and Vladimir Smolka from Trexima for valuable advice and helpful assistance with the data. Comments from numerous participants on earlier versions presented at conferences in WISE, LEED, SOLE, CAED, EALE, NASMES, Ostrava, Karvina and K.U. Leuven are gratefully acknowledged.
Increased sorting and wage inequality in the Czech Republic
New evidence using linked employer–employee dataset†
Version of Record online: 28 FEB 2013
© 2013 The Authors Economics of Transition © 2013 The European Bank for Reconstruction and Development
Economics of Transition
Volume 21, Issue 2, pages 357–380, April 2013
How to Cite
Eriksson, T., Pytliková, M. and Warzynski, F. (2013), Increased sorting and wage inequality in the Czech Republic. Economics of Transition, 21: 357–380. doi: 10.1111/ecot.12014
- Issue online: 15 MAR 2013
- Version of Record online: 28 FEB 2013
- wage inequality;
- linked employer–employee dataset;
- firm panel data;
- Czech Republic
This paper makes use of a linked employer–employee dataset to examine the evolution of wage inequality in the Czech Republic during 1998–2006. We find evidence of slightly increasing returns to human capital and diminishing gender inequality and document sharp increases in both within-firm and between-firm inequality. We investigate several hypotheses to explain these patterns: increased domestic and international competition, decentralized wage bargaining, skill-biased technological change and a changing educational composition of the workforce. Domestic competition is found to lower within-firm inequality whereas we find no evidence that increased international trade at the industry level is associated with higher between- or within-firm wage inequality. The key factors driving the observed increase in wage inequality are increased educational sorting and the inflow of foreign firms to the Czech Republic.