Shocks and Rigidities as Determinants of CEE Labour Markets’ Performance

29 Pages Posted: 6 Jul 2013

See all articles by Maciej Bukowski

Maciej Bukowski

Warsaw School of Economics (SGH)

Grzegorz Koloch

National Bank of Poland; Warsaw School of Economics

Piotr Lewandowski

Warsaw School of Economics (SGH)

Date Written: July 2013

Abstract

In this article, the impact of real wage, productivity, labour demand and supply shocks on eight Central and Eastern European (CEE) economies from 1996–2007 is analysed with a panel structural vector error correction model. A set of long‐run restrictions derived from the dynamic stochastic general equilibrium (DSGE) model is used to identify structural shocks, and fluctuations in foreign demand are controlled for. We find that the propagation of shocks on CEE labour markets resembles that found for OECD countries. Labour demand shocks emerge as the main determinant of employment and unemployment variability in the short‐to‐medium run, but wage rigidities were equally important for observed labour market performance, especially in Poland, Czech Republic and Lithuania. We associate these rigidities with collective bargaining, minimum wage, active labour market policies and employment protection legislation.

Keywords: Unemployment, rigidities, transition economies, cointegration, structural VECM, panel econometrics, DSGE models

Suggested Citation

Bukowski, Maciej and Koloch, Grzegorz and Lewandowski, Piotr, Shocks and Rigidities as Determinants of CEE Labour Markets’ Performance (July 2013). Economics of Transition, Vol. 21, Issue 3, pp. 553-581, 2013, Available at SSRN: https://ssrn.com/abstract=2290418 or http://dx.doi.org/10.1111/ecot.12017

Maciej Bukowski

Warsaw School of Economics (SGH)

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

Grzegorz Koloch

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

Piotr Lewandowski (Contact Author)

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

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