Determination of Factors Affecting Wage Differentiation in EU Countries

Abstract

This study aims to identify the determinants of wage differentiation in European Union (EU) countries using panel data analysis. The literature review provides an overview of previous studies on wage differentiation, the current situation of wage differentiation in the EU, and the potential determinants and consequences of wage differentiation. The analysis shows that many potential variables influence wages and that direct modeling is problematic. However, the application of factor analysis led to the identification of significant factors, namely the economic strength of a country, the level of digitalization and working conditions, investment, and the unemployment rate. These findings are consistent with the existing literature. The robustness analysis of the results is provided. The conclusion offers recommendations for increasing wages based on the research results.