Temporary Jobs, Institutions, and Wage Inequality within Education Groups in Central-Eastern Europe

In this paper we investigate the drivers of wage inequality within education groups in Central-Eastern European Countries by employing EU-SILC microdata before (2007) and after (2012) the crisis. Our main focus is on the variability of temporary/permanent workers wage gap and on the role of institutions (labor market deregulation, union density, and wage coordination) in shaping the gap across education groups and along the wage distribution. Results, obtained by means of OLS and quantile regression methods, confirm that holding a temporary position corresponds to a statistically significant negative wage gap with respect to permanent jobs, especially for low-paid jobs and tertiary educated workers. The impact of institutional settings on the wage gap varies remarkably across education groups and wage levels, and strongly depends on the macroeconomic conditions. Labor market deregulation and weaker minimum wage provisions reduce the wage gap; this could be related to the fact the these institutional features reduce the duality on the labor market, triggering a downward convergence of permanent wages toward the lowest level of the temporary employed, especially in the context of labor reallocation and declining wages typical of recession. Stronger wage setting institutions, on the contrary, seem to reinforce duality in the labor market, although to different extents depending on the group of workers and on the part of the wage distribution concerned. (C) 2016 Elsevier Ltd. All rights reserved.