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Firms and wage inequality in Central and Eastern Europe

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  • Iga Magda
  • Jan Gromadzki
  • Simone Moriconi

Abstract

Recent studies show that firms are playing an increasingly important role in shaping wage inequality in advanced economies. We contribute to this literature by analysing wage inequality patterns and their firm dimension in Central and Eastern European countries. We use large, linked employer-employee datasets with data from the 2002-2014 period. We find that unlike in many other advanced economies, wage inequality levels have decreased in CEE countries, and particularly in those countries that previously had the highest wage inequality levels. The relative size of the between-firm component varied substantially across countries, and was largest in countries with the highest wage inequality levels. We further estimate the recentered influence function (RIF) regression and the Blinder-Oaxaca decomposition in order to investigate the micro-level determinants of wage inequality. Our findings indicate that the changes in wage inequality levels were mainly attributable to returns to workplace characteristics.

Suggested Citation

  • Iga Magda & Jan Gromadzki & Simone Moriconi, 2019. "Firms and wage inequality in Central and Eastern Europe," IBS Working Papers 03/2019, Instytut Badan Strukturalnych.
    • Handle: RePEc:ibt:wpaper:wp032019
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    2. Jan Pintera, 2022. "Skill-bias and Wage Inequality in the EU New Member States: Empirical Investigation," Working Papers IES 2022/26, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2022.
    3. Daniel Schaefer & Carl Singleton, 2017. "Recent Changes in British Wage Inequality: Evidence from Firms and Occupations," 2017 Meeting Papers 459, Society for Economic Dynamics.
    4. Norio Horie & Ichiro Iwasaki, 2023. "Returns to schooling in European emerging markets: a meta-analysis," Education Economics, Taylor & Francis Journals, vol. 31(1), pages 102-128, January.
    5. Laporšek, Suzana & Orazem, Peter F. & Vodopivec, Milan & Vodopivec, Matija, 2021. "Winners and losers after 25 years of transition: Decreasing wage inequality in Slovenia," Economic Systems, Elsevier, vol. 45(2).
    6. Iwasaki, Ichiro & Satogami, Mihoko, 2023. "Gender wage gap in European emerging markets: a meta-analytic perspective," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 57, pages 1-9.
    7. Makarski, Krzysztof & Tyrowicz, Joanna, 2023. "Preference for redistribution during structural change with labor mobility frictions," European Journal of Political Economy, Elsevier, vol. 77(C).
    8. Nerijus Černiauskas & Denisa M. Sologon & Cathal O’Donoghue & Linas Tarasonis, 2022. "Income Inequality and Redistribution in Lithuania: The Role of Policy, Labor Market, Income, and Demographics," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(S1), pages 131-166, April.
    9. Dagmara Nikulin & Joanna Wolszczak-Derlacz & Aleksandra Parteka, 2021. "GVC and wage dispersion. Firm-level evidence from employee–employer database," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 16(2), pages 357-375, June.
    10. Garcia-Louzao, Jose & Tarasonis, Linas, 2023. "Wage and Employment Impact of Minimum Wage: Evidence from Lithuania," Journal of Comparative Economics, Elsevier, vol. 51(2), pages 592-609.
    11. Bukowski, Pawel & Novokmet, Filip, 2021. "Between communism and capitalism: long-term inequality in Poland, 1892–2015," LSE Research Online Documents on Economics 110221, London School of Economics and Political Science, LSE Library.
    12. Masso, Jaan & Meriküll, Jaanika & Vahter, Priit, 2022. "The role of firms in the gender wage gap," Journal of Comparative Economics, Elsevier, vol. 50(2), pages 454-473.
    13. Aswini Kumar Mishra & Vedant Bhardwaj, 2021. "Wealth distribution and accounting for changes in wealth inequality: empirical evidence from India, 1991–2012," Economic Change and Restructuring, Springer, vol. 54(2), pages 585-620, May.
    14. Paola Bertoli & Veronica Grembi, 2021. "Mortality Inequality in the Czech Republic," Fiscal Studies, John Wiley & Sons, vol. 42(1), pages 171-191, March.
    15. Paweł Bukowski & Filip Novokmet, 2021. "Between communism and capitalism: long-term inequality in Poland, 1892–2015," Journal of Economic Growth, Springer, vol. 26(2), pages 187-239, June.
    16. Jose Garcia-Louzao & Alessandro Ruggieri, 2023. "Labor Market Competition and Inequality," CESifo Working Paper Series 10829, CESifo.
    17. Michal Brzezinski & Katarzyna Salach, 2022. "Determinants of inequality in transition countries," IZA World of Labor, Institute of Labor Economics (IZA), pages 496-496, June.
    18. Daniel Schaefer & Carl Singleton, 2020. "Recent Changes in British Wage Inequality: Evidence from Large Firms and Occupations," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(1), pages 100-125, February.
    19. Piotr Lewandowski & Iga Magda, 2023. "The labor market in Poland, 2000−2021," IZA World of Labor, Institute of Labor Economics (IZA), pages 426-426, March.
    20. Doan, Tinh & Ha, Van & Tran, Tuyen & Yang, Judy, 2023. "Dynamics of wage inequality over the prolonged economic transformation: The case of Vietnam," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 816-834.

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    More about this item

    Keywords

    wages; wage inequality; RIF regression; linked employer-employee data;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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