7 Ownership and Wages Estimating Public-Private and Foreign-Domestic Differentials with LEED from Hungary, 1986 to 2003. Introduction Wages in the transition economies of Eastern Europe have changed dramatically in the fifteen years since the collapse of central planning | 7 Ownership and Wages Estimating Public-Private and Foreign-Domestic Differentials with LEED from Hungary 1986 to 2003 John S. Earle and Almos Telegdy Introduction Wages in the transition economies of Eastern Europe have changed dramatically in the fifteen years since the collapse of central planning. Average wages tended to decline in the first few years of transition and to rise more At the same time the economies of the region have experienced massive organizational changes most prominently large-scale privatization and opening to the global economy including foreign direct investment. These rapid changes provide a useful context for investigating the relationship between firm ownership and the level of wages. The transfers from the state to new domestic and foreign owners took place not only quickly but John S. Earle is a senior economist at the Upjohn Institute for Employment Research and a professor of economics at Central European University. Almos Telegdy is codirector of the Labor Project at Central European University and a senior research fellow at the Institute of Economics of the Hungarian Academy of Sciences. The research on this paper was supported by a grant from the National Council for East European and Eurasian Research. The paper was presented at the Conference on Firms and Employees CAFE in September 2006 in Nuremberg Germany supported by the Institute for Employment Research IAB the Data Access Center FDZ-BA IAB the Deutsche Forschungsgemeinschaft the Research Network Flexibility in Heterogeneous Labour Markets the Alfred P. Sloan Foundation and the National Science Foundation. For helpful comments we thank Alan de Brauw Susan Helper Joanne Lowery John Pencavel two anonymous referees and participants in the 2006 AEA CAFE and SOLE meetings and in seminars at the Upjohn and Ente Einaudi Institutes. We are also grateful to Gabor Antal for outstanding research assistance to Monika Balint Judit Mathe Anna Lovasz and Mariann Rigo for
