Publication details

The Long-Run Impact of Minimum Wages on Total Factor Productivity in the European Union



Year of publication 2020
Type Article in Proceedings
Conference Proceedings of the 5th International Conference on European Integration 2020.
MU Faculty or unit

Faculty of Economics and Administration

Keywords endogenous growth theories; panel cointegrating regression; statutory minimum wages; the European Union; total factor productivity
Description Nowadays, the question of “fair minimum wages” is highly discussed among the EU and national authorities. Within the framework of The European Pillar of Social Rights, the EC have already launched consultations to strengthen existing minim wage systems in the member states. But how does the minimum wage effect the long-term economic performance in the members states? The aim of the paper is to determine the long-run impact of national statutory minimum wages on total factor productivity in the European Union. The empirical analysis is conducted on unbalanced panel data set including observations for 23 cross-sections (member states with statutory minimum wages) over the period of 1995-2017, by means of panel cointegrating regression (FMOLS estimation method). In line with endogenous growth theories, variables for human capital and R&D, as key determinants of productivity, are included in the regression. The result supported the long-run relations between total factor productivity and minimum wages and suggested a statistically significant negative impact.
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