Wage convergence after euro adoption - the case of Slovakia

Abstract

According to the theory of integration, welfare increase is the long-term indirect effect of joining the euro area. Monetary integration accelerates the processes of economic convergence, including income convergence, which is particularly desired by the societies of catching-up economies. This process is crucial for increasing the long term potential for macroeconomic sustainable growth of the economy. The countries of the Visegrad Group are institutionally and structurally similar. But only Slovak Republik adopted euro in 2009, another Visegrad countries stay by their own currencies. So it is a good opportunity to assess the effects of joining the euro zone on wage growth in the medium term through a comparative analysis. The aim of the research is to assess the impact of joining the euro area on the wage growth rate in Slovakia. The research was carried out using the comparative method. Three types of convergence are taken into account: beta, sigma and gamma. An extension of the implementation of the concept of beta, sigma and gamma convergence is the estimation for variables other than GDP, i.e. for the wage growth rate. The analysis covers the 2009-2019 period. The study confirms the existence of beta and sigma convergence. The convergence of earnings between EU countries occurs, wages in less developed CEE countries, tend to grow faster than do in wealthier ones. On the other hand, no gamma convergence was found. The higher rate of wage growth in Slovakia as compared to other countries of the Visegrad group was also not confirmed.