Republic of Poland: Selected Issues

IMF Staff Country Reports, February 6, 2019

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Selected Issues paper reviewing factors that drive wage growth in Poland and studying structural characteristics and firm-level total factor productivity (TFP) in Poland and Emerging Europe.
Examines the increase in real unit labor costs (RULC) alongside an unprecedently tight labor market.
Uses an Error-correction model to more systematically identify long- and short-term drivers of Polish wages.
Analyses use both Statistics Poland and Orbis data to assess firm-level TFP dynamics.

The increase in real unit labor costs (RULC) occurred alongside an unprecedently tight labor market.
RULC dynamics are more subdued compared with the pre-crisis period, despite a now-lower unemployment rate; this may reflect the recent influx of foreign workers.

An Error-correction model is used to identify long- and short-term drivers of Polish wages.
The model-based analysis aims to separate persistent wage determinants from transitory factors (short-run dynamics).

Analyses using Statistics Poland and Orbis data show that foreign-owned firms are associated with strong TFP performance through above-average TFP levels and growth rates.
Findings point to structural heterogeneity across firms, with ownership structure linked to TFP dynamics.

Create an environment conducive to entrepreneurship by reducing barriers to entry.
Ensure a level playing field between state owned and private firms.
Avoid barriers to scaling up businesses.
Encourage investments in innovation and research and development.

Subjects: Employment, Labor, Labor markets, Labor productivity, Production, Real wages, Total factor productivity, Wages
Keywords: CR, dampening effect, Eastern Europe, Employment, firm, Global, ISCR, Labor productivity, laggard firm, nominal wage, ownership structure, Real wages, share, support wage, TFP dynamics, Total factor productivity, wage, wage growth, Wages