Two decades of earnings inequality in Hungary

Boza, István and Neubrandt, István Martin and Pető, Rita (2026) Two decades of earnings inequality in Hungary. JOURNAL OF MACROECONOMICS, 89. No. 103779. ISSN 0164-0704

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Abstract

We use Hungarian administrative microdata harmonized within the Global Repository of Income Dynamics (GRID) framework to study earnings inequality, volatility, and mobility over 2004–2021. Aggregate earnings dispersion changes little over the two decades, with modest increases in top inequality for men and widening lower-tail inequality among young workers. One-year earnings growth shows asymmetric downside risk during recessions, especially for men, and persistently higher volatility, skewness, and kurtosis for prime-age women, consistent with career interruptions around childbearing. In the second part of the paper, we estimate AKM-style wage models with occupation effects for 2004–2010 and 2013–2019. Worker heterogeneity explains about half of wage dispersion in both periods. The role of firm and occupation premia declines, consistent with the strong increase in real minimum wages. Meanwhile, the contribution of worker–firm sorting remains quantitatively important, especially in the bias-corrected specification. Bias-corrected results suggest a strong role of assortativity in the Hungarian labor market.

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