Byambasuren Dorjnyambuu (p)

Udo Brixy

A substantial wage differential started at the beginning of the 1980s and continued during the 1990s in the USA, spreading to other developed countries. Rising wage inequality has attracted considerable attention among academics, policymakers, and practitioners. However, wage inequality research has not reached a consensus on why wage disparities have widened, and it mainly concentrates on advanced countries. EU Statistics presents the diverging trend in income inequality in EU countries, especially in Eastern Europe. This study questions why wage inequality is persistently high in some countries and low in other countries with similar socio-economic conditions. In this regard, this paper focuses on wage differentials in Eastern Europe, paying attention to six countries: Bulgaria, Romania, Poland, Hungary, Czechia, and Slovakia. The research aims to examine the main drivers behind the diverging patterns of wage inequality in these countries. European Union Statistics on Income and Living Conditions (EU-SILC) is used to estimate the quantile regression models for determining how individual factors affect the wage in different parts of the wage distribution. The extension to the Oaxaca-Blinder decomposition is applied to disentangle and quantify the contributions of factors to the significant changes in wage inequality that occurred from 2010 to 2020.

Udo Brixy (p), Lisa Bellmann

Byambasuren Dorjnyambuu

One reason for subsidizing start-ups, either directly or indirectly, is that they are expected to provide jobs, especially at times and places where unemployment is high. However, increasing unemployment usually lowers local demand, which is a particular problem for young firms and calls into question the young businesses’ prospects of success in such environments. On the other hand, young firms face difficulties in attracting workers and in particular skilled workers. This implies that such young companies, which need to grow, should benefit from an oversupply of labor in regions with high unemployment. Using linked employer-employee data for Germany, we investigate whether the regional unemployment and wage levels affect the probability of founders becoming employers. The results confirm a positive relationship between the local availability of labor and the hiring probability of young firms. Moreover, we find specific effects for particular types of young firms. Especially firms that started out with rather limited investment react to surplus labor supply by becoming employers, whereas necessity entrepreneurs, who start a business to provide a job for themselves, do not benefit from a large pool of available workers.