Consumption and Income in Slovakia
Matú¹ Senaj
PhD thesis advisor: Jarko Fidrmuc

PhD thesis - Full text   


The first chapter focuses on human capital and housing in Slovakia during the economic reforms of the last two decades. We compare households who entered the labor market before and after the economic reforms in 1989. On the one hand, we study the returns to education by different labor market cohorts using household consumption surveys. On the other hand, we analyze the determinants of housing wealth and its impact on consumption. We show that old cohorts are characterized by lower returns to human capital and consumption levels, but higher housing wealth.

The second chapter studies impacts of disposable income and financial wealth on aggregate household consumption. Results confirm that not only disposable income but also financial wealth has significant impact on consumption. We show that the most appropriate proxy for wealth is the sum of monetary aggregate M2 and assets invested in mutual funds. We also investigate the effects of interest rates, consumer confidence index and further relevant variables. It turns outthat these variables are not significant in the consumption function. The second main objective of this work is to evaluate three different consumption forecasting approaches. We show that the most accurate in sample and out of sample forecasts originate from a vector error correction model with exogenous variables.

Finally, we focus on the concept of wage flexibility which is especially important for economic policies after the Slovak euro adoption. The aim of this study is to assess the extent of wage rigidities in Slovakia. We first reproduce Holden and Wulfsberg (2007) approach with data on industrial level drawn from recent decade and we include both old and new EU Member States countries. In case of Slovakia, however, it is difficult to interpret results obtained from sectoral data. Therefore, we turn to micro-approach and apply slightly modified methodology on the company level data. The estimated extent of both nominal and real rigidity is relatively small. Conclusion that hourly compensations are rather flexible supports the decision of euro adoption in 2009.

Related papers

[1] Gertler P. and Senaj, M. (2010). Downward Wage Rigidities in Slovakia, Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 4(1), pages 079-101.

[2] Senaj, M. (2008). Consumption Function Estimate and Consumption Forecast. Ekonomicky casopis (Journal of Economics), 56(1), 3-21.