Template-Type: ReDIF-Paper 1.0

Author-Name: Lajos Tamás Szabó
Author-X-Name-First: Lajos Tamás
Author-X-Name-Last: Szabó
Author-Email: szabolaj@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (Central Bank of Hungary)



Title: The Effect of Tightness on Wages at the Regional Level in Three Central European Countries


Abstract: In this paper, I examine the effect of tightness on wages in three Central European countries. The estimation is relevant for
at least three reasons. Firstly, it is a novel exercise to check the implication of the Mortansen–Pissarides model on Central
European data. Secondly, from the central bank’s perspective it is important to know the effect of tightness on wages, since
these are the major determinants of cost-push inflation. Thirdly, the magnitude of the spillover effect from tightness to wages
can help determine the efficiency of a targeted development policy. My contribution is directly identifying the effect of tightness
on wages from regional heterogeneity. I examine the effect of tightness on wages in Hungary, Slovakia and Poland using panel IV
method on district level data. The direct effects are similar in the three countries, i.e. there is a positive link between tightness
and wages. The magnitudes are somewhat different in Poland then in Hungary and Slovakia. There is spatial spillover effect in
Hungary but this indirect effect is missing in Poland and Slovakia.


Length: 36 pages
Creation-Date: 2019
File-URL: https://www.mnb.hu/letoltes/mnb-wp-2019-4-final-1.pdf
File-Format: Application/pdf
Number: 2019/4
Classification-JEL: J31, J61, J63, J64
Keywords: local labour markets, labour market tightness, wage equation.
Handle: RePEc:mnb:wpaper:2019/4