The Distribution of Wages in Belarus
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The Distribution of Wages in Belarus FRANCESCO PASTORE1 & ALINA VERASHCHAGINA2 1
Seconda Universita` di Napoli, Piazza Matteotti 81055, Santa Maria Capua Vetere (Caserta), Italy. E-mail: [email protected] 2 Belarusian National Technical University, Belarus
This paper uncovers evidence on the distribution of wages in Belarus in the second half of the 1990s. The returns to education and work experience are high and stable. While the former is a typical finding of transition studies, the latter is not. This might be due to the pervasive role of the state in fixing wages in the dominant budget sector, rather than to market forces coming into play. Women experience a small, though largely unexplained wage gap coupled with higher than average returns to education. A wage curve effect is found, which is similar in size to that of other transition countries, but much higher than in market economies. Comparative Economic Studies (2006) 48, 351–376. doi:10.1057/palgrave.ces.8100071
Keywords: wage distribution, returns to education, gender wage gap, wage curve, Belarus JEL Classifications: D31; J31; P2
INTRODUCTION This paper uncovers empirical evidence on the distribution of wages in Belarus. Even though neglected in the international literature,1 the case under scrutiny is very interesting above all for the unusual reform path followed. Contrary to the expectations, the extremely gradualist approach to economic reforms brought about fast output recovery, when compared to that in the neighbouring countries of the Commonwealth of Independent States (CIS). Nonetheless, the recovery was accompanied by persistent abnormal financial instability. The following section briefly describes the country’s reform path and the so-called tariff system, a centrally determined wage grid, inherited 1 Belarus is not included in any available study on the distribution of wages in transition countries.
F Pastore & A Verashchagina Wages in Belarus
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from the pre-transition period. It also gives an overview of the debate on the distribution of wages in transition countries. The remainder of the paper deals with three main issues, starting from the analysis of returns to education based on the 1996 and 2001 waves of the Belarusian Household Survey on Incomes and Expenditures (BHSIE; the subsequent section). Note that Belarus has always scored one of the highest ranks of the Human Development Index (HDI, UNDP, 2001) in the CIS, essentially because of the high level of human capital accumulation. The question then arises as to how the on-going economic transformations affected the returns to human capital. Of particular interest is the size of the premium for University graduates, especially in comparison with that in other transition countries. We find that the annual rate of return to 1 year of education is high, one of the highest among transition countries and argue that this is not only because of the fearful attempts to introduce market mechanisms, but, more likely, because of the pervasive role of the sta
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