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Wage function estimation of Estonia and LatviaGašper Kolar,
Nejc Fir, 2024, original scientific article
Abstract: The study of wage determinants goes back to the beginning of
economic science, with theoretical and empirical foundations
providing the basis for the specification of a model of the wage
function. Using the OLS method, we study the determinants of real
wages for Estonia between 2006Q3 and 2022Q3 and Latvia between
2004Q1 and 2022Q3. The lagged dependent variable exerts the most
considerable impact on real wages, i.e., real wages in the preceding
quarter. We find that unemployment has a relatively larger impact on
real wage dynamics than real productivity in the Latvian than in
Estonian model. In the Estonian model, real productivity has a
relatively stronger impact than unemployment in explaining real
wages. In both countries, changes in real productivity impact real
wages with a one-quarter lag. The findings on the relative influence of
real wage determinants guide economic policymakers in targeting
measures that could increase real wages in both countries.
Keywords: wage function, OLS, Estonia, Latvia
Published in DKUM: 28.05.2025; Views: 0; Downloads: 9
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