Innovation and Rent Sharing in Corporate Wage Setting in Hungary

Skill biased technical change arrived to Hungary with the transition to market economy. As Hungary integrated into the international economy, technical change progressed much faster in some sectors than in mature market economies. That lead to increasing skill premia, intensive rent sharing, and additional benefits for workers at innovative firms. This paper analyses wage setting at Hungarian firms after the micro-economic restructuring and stabilisation period, in the years 1998-2006, with a special regard to wage determination at innovative firms. Wage setting is characterised by intensive rent-sharing. Premium at innovative firms varies with the way of measuring it, and also changes with the sector and over time.