Has the shift toward markets hurt ethnic minorities?: Changes in ethnic earnings differentials in Bulgaria’s early transition

Relies on cross‐sectional survey data from 1986 and 1993 to explain an increase in the ethnic Turk‐ethnic Bulgarian earnings differential in Bulgaria in the country’s early transition. Empirical evidence indicates that the ethnic Turks closed both the gap in the number of years of education and experience acquired during this time. Further, the Turks began to enter the growing commerce and transportation industries in the early transition. Shifts in the wage structure, however, favored the ethnic Bulgarians, and these changes outweighed ethnic Turk gains in the measured characteristics. In addition to these shifts, an increase in the overall level of inequality in the labor market punished those at the low‐end of the wage distribution, exacerbating the existing ethnic earnings differential. These results imply however, that the ethnic Turks are responding to market signals and if it continues, this trend will diminish the ethnic earnings gap.