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The dynamics of wage determination in Romania

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  • The results and conclusions of this paper are those of the author and do not necessarily reflect the views of the IMF. I would like to thank an anonymous referee for insightful comments, and Emmanuel van der Mensbrugghe, Juan J. Fernandez-Ansola, Tonny Lybek, and officials of the Ministry of Finance of Romania who participated at a seminar in Bucharest for their comments and suggestions, and Dorin Mantescu for help with the data.

Abstract

This article examines wage developments in Romania over the last 20 years, discusses the evolving role of government wage policy and structural labour market changes, and analyses the dynamics of the wage determination process. It finds that government wage policy has had a significant demonstration effect on private sector wages, driven mainly by policy decisions over the past few years. The article also finds strong causality from private sector wages to wages in state-owned enterprises (SOEs) and government. No causality was found for changes in government wages to wages in SOEs or from SOE wages to private sector wages.

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