Innovation and wages constrained with budgetary deficit and unemployment in the European Union countries

Laura Južnik Rotar, Roberta Kontošić Pamić and Štefan Bojnec

Economic Research-Ekonomska Istraživanja, 2022, vol. 35, issue 1, 1561-1580

Abstract: This paper aims to research the driving forces of wages across the countries of the European Union (EU-28) during the period 2006-2018. We apply structural equation modelling to analyse relationships between observed variables and latent variables, focusing on factors explaining wages. Based on the literature review, we hypothesized that innovation, budgetary deficit and the rate of unemployment predict wages across EU-28 countries. Our results suggest that innovation is a significant factor in explaining wages. The budgetary deficit has a significant negative impact on wages, while the effect of rate of unemployment is insignificant. The findings of our research underline the importance of policies that accelerate the growth in labour productivity, particularly those which boost innovation and ensure macroeconomic stability, efficient markets, and an adaptable and skilled workforce.

Date: 2022
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DOI: 10.1080/1331677X.2021.1985564

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