An empirical analysis of the link between labour productivity and salary in EU-CEE countries

Abstract

This paper investigates the relationship between labour productivity and average wages per
employee in 10 Central and Eastern European (CEE) European Union member states over
the period 2009–2023. Using panel data from Eurostat and a log–log econometric
specification, the study estimates the elasticity of wages with respect to labour productivity
to assess whether wage dynamics align with productivity growth. The empirical results
indicate a strong and statistically significant relationship between labour productivity and
wages in all analysed countries. However, in seven out of ten economies, wage growth
exceeds productivity growth, suggesting a persistent decoupling that may undermine
macroeconomic competitiveness and long-term sustainability. Only Hungary, Poland, and
Slovenia display a more balanced wage–productivity relationship during the analysed
period. The findings highlight structural vulnerabilities specific to post-transition economies
and emphasize the importance of productivity-enhancing investments, technological
upgrading, and human capital development. The study contributes to the literature on
competitiveness in CEE countries by providing empirical evidence on the risks associated
with prolonged wage–productivity misalignment and its implications for economic growth
and economic policy design.