Department of Economics

Croatian Wage Inequality and Wage Differentials

Department of Economics

University of Delaware

Working Paper #2010-03

Croatian Wage Inequality and Wage Differentials, 1970-2008: Measurement and Determinants

Ivo Bićanić, Saul D. Hoffman, and Oriana Vukoja

ABSTRACT

We use newly-available data on income by educational and vocational attainment and grouped income-interval data to examine wage inequality and wage differentials in Croatia between 1970 and 2008. This is a time period during which Croatia experienced enormous institutional and structural change, including the fall of socialism, hyperinflation, the Homeland war and the creation of sovereign Croatia. We construct both Gini and Theil measures of inequality, using grouped data. We find a general compression of earnings differences by educational and vocational attainment, but with a slight increase in the capitalist period post-1990. The income interval data shows a clearer pattern of a secular increase in inequality that is sharper in the capitalist period. We also examine within-industry inequality to see whether industries that experienced stronger structural changes also experienced a greater increase in inequality. Our evidence on this is mixed.

JEL Codes: J3, P2, P23, E34

Keywords: Croatia, Transition Economy Labor Markets, Inequality, Gini coefficient, Theil Index

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