Romani Employment in Hungary After the Post-Communist Transiti

Abstract

Employment rate of Romanies is very low in Central and Eastern Europe. In Hungary, it is less than half of the national average. The gap emerged in the early years of the post-communist transition and slightly widened since. We decompose the difference and show that educational composition and geographic isolation explain about 40 per cent of it. The rest is due to differences in unobserved skills (pre-market factors) and labor market discrimination. The residual employment gap is increasing in the local unemployment rate, and this relationship strengthened significantly after the early 1990’s. We also show evidence that no such relationship can be found in the regional distribution of the ethnic gap in student outcomes. Our interpretation is that labor market discrimination became stronger in high unemployment areas.