Scandinavian Working Papers in Economics

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

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

Tor Eriksson (), Mariola Pytliková () and Frederic Warzynski ()
Additional contact information
Tor Eriksson: Department of Economics, Aarhus School of Business, Postal: Frichshuset Hermodsvej 22, 8230 Åbyhøj , Denmark
Mariola Pytliková: Department of Economics, Aarhus School of Business, Postal: Frichshuset Hermodsvej 22, 8230 Åbyhøj , Denmark,
Frederic Warzynski: Department of Economics, Aarhus School of Business, Postal: Frichshuset Hermodsvej 22, 8230 Åbyhøj , Denmark,

Abstract: In this paper, we look at the evolution of firms’ 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

JEL-codes: J31; P31

48 pages, February 1, 2009

Note: 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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