Under communism, workers had their wages set according to a centrally-determined
wage grid. In this paper we use new micro data on men to estimate returns to human
capital under the communist wage grid and during the transition to a market economy.
We use data from the Czech Republic because it is a leading transition economy in
which the communist grid remained intact until the very end of the communist regime.
We demonstrate that for decades the communist wage grid maintained extremely low
rate of return on education, but that the return increased dramatically and equally
in all ownership categories of firms during the transition. Our estimates also indicate
that mens wage-experience profile was concave in both regimes and on average it did
not change from the communist to the transition period. However, the de novo private
firms display a more concave profile than SOEs and public administration. Contrary
to earlier studies, we show that mens inter-industry wage structure changed substantially
between 1989 and 1996.