The Productivity–Real Wage Nexus in Emerging European Economies: Evidence from Poland

ABSTRACT

We investigate the nature of the wage–productivity nexus in Poland, considering the validity of the alternative theories of this relationship in the context of a recent hypothesis pointing to the role of multinational corporations (MNCs) in decoupling productivity from wages. Using spatial and nonspatial dynamic panel models, we find indirect support for this hypothesis. Sectors with the highest presence of MNCs tend to have higher labor productivity but lower wages. Unlike productivity, wages are also subject to stronger spatial spillovers, suggesting that they are sometimes set based on their geographic proximity, rather than on workers’ productivity. The policy implications of the findings are discussed.

KEYWORDS:

• Productivity
• wages
• efficiency wages
• spatial interactions

JEL:

• E24
• R10
• R11

Disclosure Statement

No potential conflict of interest was reported by the authors.

Notes

1. The CESEE economies with the best convergence outcomes improved significantly in the following indicators: institutional quality, labor moving from agriculture to sectors with higher labor productivity, external competitiveness and trade openness, labor market participation rate, human capital level, and the investment ratio.

2. This effect is, therefore, weaker if unemployment is high and the existing wage level is close to the minimum wage. Then, an entering MNC will not need to compete for workers by setting higher wages.

Additional information

Funding

This work was supported by the Narodowe Centrum Nauki [2015/19/B/HS4/ 00370].

Notes on contributors

Paweł Gajewski

Paweł Gajewski is an Associate Professor at the University of Łódź, where he received his ph.D. in Economics. His research interest include regional and spatial economics as well as macroeconomics and the issues related to monetary integration. He is conducting his research with support of the Polish National Science Centre. He worked for the National Bank of Poland and the Institute of Economic Sciences of the Polish Academy of Sciences. He has published papers in the International Review of Financial Analysis, European Planning Studies, Emerging Markets Finance and Trade, Eastern European Economics and Applied Economics Letters, among others. He was a senior editor in the International Journal of Emerging Markets.

Ali M. Kutan

Ali M. Kutan is a Distinguished Research Professor of Economics and Finance at Southern Illinois University at Edwardsville. He received his Ph.D in Economics from Arizona State University. His research interests include international finance, financial markets and institutions, and financial aspects of economic development. His recent work focuses on emerging economies, including Central and Eastern European economies and China. His research is supported through several agencies, including The British Council, The National Council for Eurasian and East European Research, the U.S. Department of Education, and the William Davidson of Institute of the University of Michigan Business School. He was a visiting scholar at the Economic Research Department of the Federal Reserve Bank of St. Louis. He is currently the Director of Research and Development of the Society for the Study of Emerging Markets. He served as a consultant to the World Bank, Asian Development Bank, US Commerce Department, and private companies. He has published extensively in over 160 peer review economics and finance journals. He is the editor of Borsa Istanbul Review and co-editor of Economic Systems. In addition, he serves as an associate editor of International Review of Financial Analysis and Economic Modelling.