Prague Economic Papers 2014, 23(4):493-513 | DOI: 10.18267/j.pep.495

Economic Crisis and Wage Divergence: Empirical Evidence from Romania

Gheorghe Zaman1, Zizi Goschin2
1 Institute of National Economy, Romanian Academy of Science, Bucharest, Romania (georghezaman@ien.ro).
2 Bucharest Academy of Economic Studies and Institute of National Economy, Romania (zizi.goschin@csie.ase.ro).

This paper addresses the question of convergence in real wages across Romanian counties, while putting a spotlight on the recent economic crisis, which has hit hard the entire economy. Following the main methodological trends in the literature, convergence methods were applied using the traditional cross-section approach. The empirical analysis covering a 21-year period provided clear evidence in favour of ß-convergence, but indicated ?-divergence (Galton's fallacy). Wages' dispersion seems to rise during the economic crises and persists in the first stage of recovery as well. This finding provides support to Barro and Sala-i-Martin's theory on the temporary divergence effect induced by economic shocks.

Keywords: economic crisis, sigma and beta convergence, real wage, Romania
JEL classification: J31, O47, R15

Published: January 1, 2014  Show citation

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Zaman, G., & Goschin, Z. (2014). Economic Crisis and Wage Divergence: Empirical Evidence from Romania. Prague Economic Papers, 23(4), 493-513. doi: 10.18267/j.pep.495
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