Two decades of earnings inequality in Hungary
A new study by István Boza, Martin Neubrandt, and Rita Pető uses Hungarian administrative microdata harmonized through the Global Repository of Income Dynamics (GRID) framework to examine how much has earnings inequality changed in Hungary since the mid-2000s. Covering 2004 to 2021, the paper finds that aggregate annual earnings inequality moved far less dramatically than one would expect. The big picture is one of broad stability, with only modest increases in top-end (among high-earners) inequality among men and rising lower-tail (among low earners) inequality among young workers. But that stability should not be mistaken for stillness: recessions exposed asymmetric downside risks, and women’s earnings dynamics, especially at prime working ages, remained more volatile, consistent with career interruptions and labor-supply changes around family formation.
During the studied period, Hungary experienced large increases in minimum wages and a clear decline in hourly wage dispersion, suggesting that wage floors compressed differences across low-wage jobs, firms, and occupations. Yet this did not translate into an equally strong decline in monthly or annual earnings dispersion. The reason is that the amount of work also changed: variation in contracted hours and employment intensity became more important, especially among low-wage workers. In other words, raising hourly wages can narrow one dimension of inequality while leaving annual earnings inequality partly intact if workers’ hours, months worked move in the opposite direction.
The linked employer-employee analysis adds another layer to the story. Persistent worker heterogeneity explains roughly half of wage dispersion in both the earlier and later periods, while firm and occupation wage premia decline over time. At the same time, worker-firm sorting remains quantitatively important: high-wage workers are still disproportionately employed by high-premium firms, even as wage floors reduce some gaps between employers.
Reference:István Boza, Martin Neubrandt, Rita Pető:
Two decades of earnings inequality in Hungary,
Journal of Macroeconomics, Volume 89, September 2026,
https://doi.org/10.1016/j.jmacro.2026.103779.
