Specification of dynamic wage-price relations in Poland (1980?1991)

Abstract

This paper focuses on the analysis of wage-price relationships during the period 1980-1991 in Poland. The dynamics of wage and price series under radical structural changes are examined, as well as the impact of earlier sharp price increases. The process of wages-toprices adjustment both in the long-and short-term is analysed. The hypothesis that the introduction of economic reform (at the beginning of 1990) would result in a tendency towards the stabilization of real wages is investigated. This is done through integration and cointegration analysis of wage and price series with special attention being paid to the problems arising from the •(2) character of the variables investigated. The concept of polynomial cointegration is applied to formulate error correction terms for the short-run model of wages. The computations have been made using quarterly data. The results reflect an inhomogeneity of the period investigated, especially the effects of the introduction of economic reform at the beginning of 1990. The nonstationarity of real wages is confirmed, but not their tendency towards stabilization.

Price-wage dynamics in a transition economy: The case of Poland

“…2 This result is confirmed by the stationarity of second order differenced wage series, not reported in Table 1, and is in agreement with the findings in Blangiewicz and Bolt (1992), based on a different sample period.…”

“…In the applied economic literature wage-price relationships have been extensively studied for the Western economies (see Monfort andRabemanjara, 1990 andBlanchard, 1986, among others) and, more recently, also for Eastern economies (see Blangiewicz and Bolt, 1992;Charemza and Gronicki, 1988;Commander andCoricelli, 1991 andWelfe, 1991, among others). A major problem encountered in these studies concerns the non-stationarity of wages and prices series, with the complication that, for Eastern economies, this evolutionary course is frequently accompanied with one or more structural breaks.…”