From planning to chaos to market: Ethnic inequality in Bulgaria

We document changes in relative earnings of the ethnic Turkish workers in Bulgaria through the country’s transition from planning to markets. Using data from four periods: pre-transition communist era (late 1980s), early transition years (early 1990s), late transition years (early 2000s), and post-transition (late 2000s), we find that the level of raw ethnic inequality (measured as earnings differences between Turkish and Bulgarian workers) increased immediately after the regime change and plateaued throughout the course of transition. Ethnic inequality measures adjusted for observable characteristics follow a similar pattern but post-transitional differences between ethnic groups disappear. Changes over time in the ethnic earnings gaps differ for men and women. The raw and adjusted male ethnic gaps increased steadily during transition years but dropped post-transition, while the raw female ethnic gap fluctuated across the four periods. The adjusted female ethnic gap disappeared completely in the postransitional years. We identify different sources of the changes in the level of ethnic inequality, such as changes in the labor market characteristics and in the wage structure. Evidence suggests that the decline in the relative earnings of Turkish men was due primarily to the widening of the wage structure. Turkish working women improved their relative standing mainly from more favorable changes in labor market characteristics. These changes were only partially due to a selection in labor force participation.