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Staff Papers Logo    June 1998
Volume 45, Number 2
Competitiveness in Transition Economies: What Scope for Real Appreciation?
By Kornelia Krajnyak and Jeromin Zettelmeyer

Full Text of This Article (PDF 2,242 K)

Abstract: We estimate equilibrium dollar wages for 15 transition economies of Central and Eastern Europe (CEE) and the former Soviet Union. Equilibrium dollar wages are interpreted as full employment wages consistent with a country's physical and human capital endowment, and estimated by regressing actual dollar wages on productivity and human capital proxies in a short (1990-95) panel of 85 countries. The main results are: (1) equlibrium dollar wages have appreciated steadily in the Baltic countries and fast-reforming CEE transition economies, but have been flat in most CIS countries; and (2) 1996 actual dollar wages remain below estmated equilibrium dollar wages for most, but not all, transition economies covered. [JEL F14,F21,F41,P20,P50]

1998 International Monetary Fund