ECONOMIC TRANSFORMATION AND THE REVALUATION OF HUMAN CAPITAL – HUNGARY, 1986–1999

The paper analyses skills obsolescence during transition to the market economy, using individual wage data from Hungary, 1986–1999. The link between workers ’ age composition and firms ’ productivity is also examined using firm-level information. Transition started with the collapse of demand for unskilled labor and the concomitant improvement in the relative position of skilled workers. At later stages of the transition, when technological change gained impetus, general appreciation of skilled labor stopped. Since 1992 the market value of skills acquired under communism has been falling. Consistent with the wage data, the productivity estimates suggest the devaluation of skills acquired under communism. 1