We extend the benchmark model of Aghion and Blanchard (1994), assuming two segments of the emerging private sector that differ in workers' productivity. We look at the paths of employment, wages, taxes, labor costs and profits during and after the transition, up until the shock is fully...

In January 2001 the Hungarian government increased the minimum wage from Ft 25,500 to Ft 40,000. One year later the wage floor rose further to Ft 50,000. The paper looks at the short-run impact of the first hike on small-firm employment and flows between employment and unemployment. It finds...

The effect of minimum wages on employment has been a matter of debate for more than a decade. Apart from a few cases (Puerto Rico, Indonesia, Columbia) the empirical works analysed the aftermaths of minor increases in the minimum wage, and yielded mixed results. Hungary 2000-2002 provides a...