WAGE DETERMINATION IN LABOR-MANAGED FIRMS UNDER MARKET-ORIENTED REFORMS - ESTIMATES OF STATIC AND DYNAMIC-MODELS

In this paper we present a framework for analyzing the wide wage dispersion observed in a suddenly decentralized socialist system with workers’ control. We model a process through which workers may appropriate capital rents as income and, using Yugoslav data from the 1960s and 1970s, we estimate a dynamic approximation to an earnings equation and an equation derived directly from a dynamic model. Our principal finding is that the appropriation of capital rents by workers does not account for the wide interindustry earnings differentials observed in the relatively free market, Yugoslav environment of the 1960s and 1970s. J. Comp. Econom., September 1993, 17(3), pp. 687-700. London Business School, Sussex Place, London NW1 4SA; and University of Pittsburgh, Pittsburgh, Pennsylvania 15260. © 1993 by Academic Press, Inc.