Employment and Wage Dynamics in the Estonia Transition, 1989-1995

This study monitors the effects of economic transition on wages and employment in a former Soviet Republic. Estonia’s case is of particular interest because of its early adoption of relatively free labor market policies. Relative wages for the highest educated groups rose for all age groups. There were also rapid increases in returns to job experience, particularly at young ages. Increasing wage dispersion across human capital groups was accompanied by narrowing wage dispersion within human capital groups. Relative wages rose in sectors which gained relative employment, while relative wages fell in shrinking sectors, suggesting that labor market equilibrating mechanisms developed very rapidly in Estonia _________________________________