On the Identification of Relative Wage Rigidity Dynamics A Proposal for a Methodology on Cross-Section Data and Empirical Evidence for Poland in Transition

We present a new and simple empirical methodology to identify relative wage rigidity dynamics. The methodology is applied to data from the Polish Labour Force Survey for the period 1994 to 1998. We estimate ceteris paribus changes in relative wage and unemployment differentials for various labour market defining characteristics. A simultaneous increase in the relative wage and the unemployment likelihood is defined as a relative wage rigidity dynamic for a labour market characteristic. We find that the Polish wage structure generated hardly any rigidities between 1994 and 1998 nor did it reduce possibly existing rigidities during that period. Acknowledgement Part of this research was undertaken with support from the European Commission’s Phare ACE Programme under the project P97-8055-R ‘Labour Market Flexibility in the Wake of EU Accession Poland Compared With the Iberian Experience’. The content of the publication is the sole responsibility of the author and it in no way represents the views of the Commission or its services. Many thanks go to Jan Witkowski, Central Statistical Office (GUS) and Warsaw School of Economics, without whom this research would not have been possible, for his co–operation and advice within this project. I am indebted to Una-Louise Bell, Herbert S. Buscher and Viktor Steiner, ZEW Mannheim, Bernd Fitzenberger, University of Mannheim, Eugeniusz Kwiatkowski and Leszek Kucharski, University of Lodz, Rafael Lalive, University of Zürich, Michael Lechner and Ruth Miquel, SIAW, University of Sankt Gallen, as well as to the participants of the Konstanz – St. Gallen Ph.D. Seminar and the Warwick Summer Research Workshop ‘Economics of Labour Markets’ for helpful comments on this paper. All remaining errors are my own.