A1555
Title: Labor market dynamics and labor market institutions: The cointegrated VAR approach
Authors: Sylwia Roszkowska - University of Lodz (Poland) [presenting]
Abstract: The aim is to analyze long-run relationships between main labor market variables (wages, unemployment, productivity) and labor market institutions using data for Poland. The provided analyses focus on the labor market variables, labor market institutions (such as minimum wages, union density, EPL, tax wedges) and prices, interest rate and exchange rate. The data covers period from 1995:01 to 2015:04. The cointegrated VAR (CVAR) analysis is used, which allows for identification of the long run relations, common stochastic trends and the estimation of the adjustment dynamics in the system. Having estimated parameters of aforementioned relations, the main driving forces of the labor market can be detected. The results are as follow. The increasing product market competition seems to be the main driving force during the analyzed period of convergence of Polish economy to the more advanced European economies. The Polish inflation rate has adjusted over long run to the European purchasing power parity and Balassa-Samuelson effect on consumer prices can be confirmed. Moreover, labor market tightness matters in the process of forming the real wages . The tighter labor market is, the lower the bargaining position of employees and the lower pressure on wages are. The extended Phillips curve hypothesis is also confirmed.
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