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Aggregate Wage Flexibility in Selected New EU Member States 13

A finding of limited aggregate wage flexibility in the new member states is not new in the
literature. For example, RadziwiH and Walewski (2003) analyze labor market adjustment in six
Eastern European countries, using quarterly data over 1995-2002. The episodes of real wage
adjustment to unemployment are identified as being 1997-1998 for the Czech Republic, 1999 for
Slovakia, and the pre-2000 period for Lithuania. No significant periods of real wage adjustment
are reported for Hungary, Latvia, and Poland. This is also a pattern we can see from the estimates
for the two sub-periods shown in Table 3.

Table 3: Elasticity of Wages to the Unemployment Rate, time-series estimates

CE-4

________________ERM-II

_______________EMU-3________

95-99

00-04

95-99

00-04

95-99

00-04

CZ

-0.154***

-0.017

ES

0.001

-0.042

AT

0.002

-0.017

HU

0.11

-0.43

LA

0.049

-0.038

GR

-0.302*

-0.278

PL

-0.129

0.047

LI

-0.113*

-0.004

PT

-0.001

-0.015

SK

-0.117**

0.116

SL

-0.097

-0.053

Note: OLS estimates of eq. (1) with White heteroscedasticity consistent standard errors.

***, **, * denote 1%, 5% and 10% significance levels.

Table 4a: Elasticity of Wages to the Unemployment Rate, panel estimates

Dependent variable: growth rate of nominal wages

Regressors:

95-99________

00-04_________

dU

-0.136 ***

0.015

ERM*dU

0.067 *

-0.020

gCPI(-1)

0.239 ***

0.031

gPROD

0.116

-0.066

Country Fixed Effects*

**

_CZ--C

0.028

0.018

_HU--C

0.026

0.028

_PL--C

0.031

0.012

_SK--C

0.021

0.020

_ES--C

0.033

0.026

_LA--C

0.022

0.019

_LI--C

0.021

0.010

_SL--C

0.021

0.021

N obs.

157

160

Adj. R-

sq.

0.24

0.16

F-stat

5.54 ***

3.75 ***

Durbin-Watson stat

2.19_________

2.23___________

Note: Fixed effects estimates of eq. (3) with White heteroscedasticity consistent standard errors. ***
**, * denote 1%, 5% and 10% significance levels.



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