Wage Differences in Poland at the County Level and their Determinants

Abstract

This study investigates the impact of unemployment and labour productivity on relative wages in Polish counties (powiats) from 2008 to 2021. Labour productivity is measured as the ratio of sold industrial production to the number of workers. The data is sourced from the Local Data Bank of Statistics Poland. The analysis employs the Solow model of efficiency wages, the neoclassical Solow model, and the Durbin model of spatial econometrics. The results reveal that both unemployment and labour productivity are statistically significant in explaining relative wages, with unemployment having the strongest, albeit negative, effect during the study period. Notably, changes in unemployment rates or wages in a county influence wage changes in neighbouring counties. The issue of spatial wage differences at the county level in Poland has not been sufficiently explored in recent years. Although recent research has focused on regional (voivodeship-level) wage differences, there remains a gap in understanding wage differences at the county level. Given changes in the Polish labour market, particularly due to the COVID-19 pandemic, this study aims to update previous findings and provide a more detailed analysis.