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Department of Economics, Aarhus School of Business, University of Aarhus Working Papers, Department of Economics, Aarhus School of Business, University of Aarhus

No 09-5:
Increased Sorting and wage Inequality in the Czech Republic: New Evidence Using Linked Employer-Employee Dataset

Tor Eriksson (), Mariola PytlikovŠ () and Frederic Warzynski ()

Abstract: In this paper, we look at the evolution of firmsí wage structures using a linked employeremployee dataset, which has longitudinal information for firms and covers a large fraction of the Czech labor market during the period 1998-2006. We first look at the evolution of individual wage determination and find evidence of slightly increasing returns to human capital and diminishing gender inequality. We then document sharp increases in both within-firm and between-firm inequality. We investigate various hypotheses to explain these patterns: increased domestic and international competition, an increasingly decentralized wage bargaining, skill biased technological change and a changing educational composition of the workforce. We find some support for that all these factors have contributed to the changes in the Czech wage structure, and that increased sorting is strongly associated with the observed changes in wage inequality.

Keywords: sorting; wage inequality; linked employer-employee dataset; firm panel data; Czech Republic; (follow links to similar papers)

JEL-Codes: J31; P31; (follow links to similar papers)

48 pages, February 1, 2009

Published as: Eriksson, T., Pytlikova, M. and F. Warzynski (2013): "Increased Sorting and Wage Inequality in the Czech Republic: New Evidence Using Linked Employer-Employee Dataset." Economics of Transition (IF: 0.679), Vol. 21, Issue 2, pp. 357-380. DOI: 10.1111/ecot.12014.

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