Department of Economics and Business Economics

Increased Sorting and Wage Inequality in the Czech Republic: New Evidence Using Linked Employer-Employee Dataset

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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 betweenor
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.
Original languageEnglish
JournalEconomics of Transition
Pages (from-to)357-380
Number of pages24
Publication statusPublished - 2013

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