Work detail

Labor Costs in Industrialized Countries

Author: Mgr. Kopecký Martin
Year: 2009 - winter
Leaders: Ing. Michaela Erbenová Ph.D
Work type: Doctoral
Language: English
Pages: 89
Awards and prizes:
Abstract: This thesis is a contribution to the debate on convergence of labor cost. The first part shows
Samuelson’s (1948) Factor Price Equalization Theorem, in which free trade equalizes factors’
reward. Further, we present extension to the basic model and discuss model’s applicability to
more recent economic models.
The second section is dedicated to the discussion of the role of multinational enterprises as
they serve as mediators of factor price convergence by transferring factor endowment and by
affecting productivity and wages in the host country.
The third part sets the stage for empirical assessment by highlighting principal features
associated with international comparison of wages, exchange rate and convergence (nominal
and real).
Finally, we propose and empirically test convergence hypothesis by applying unit root tests
for a group of 21 industrialized countries for 1961– 2006. We have found that labor costs
convergence is surprisingly well supported by the data both for individual countries and for
the panel data.
We also assessed the position of countries in the Central and Eastern Europe. Despite positive
growth differential of labor costs, these countries still enjoy the position in which their labor
costs converge relatively but, due to low base, diverge absolutely. We estimate that the
absolute gap should reach its maximum in approximately 10 years for the Czech Republic and
Hungary and 15 years for Slovakia and Poland.
Keywords: Labor Costs, Convergence, Factor Price Equalization
JEL classification: F 11, F 43
Downloadable: Thesis




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