Globalization and the shifts in earnings inequality in Poland

Over the 20-year transition process Poland’ s economy has experienced the fundamental changes generated by globalization: moving from manufacturing to services, trade openness and foreign capital flows, technological change, education progress, and migration.  These changes have influenced both sides of labor market and they have been responsible for the shifts in earnings inequality. Distinguishing a polarization of the distribution from upgrading, downgrading or convergence can be crucial for identifying causes of changes in income inequality resulted from globalization.

There is a main research question: who derives benefit from globalization in Poland? The answer required: firstly, to identify the shifts in the earnings distribution across working groups in Poland over 1998-2010; secondly, to investigate (direct and indirect) mechanisms through which globalization has affected these shifts. In the first step,  the research is based on the relative distribution method. The analyses refer to household’s income from hired work that covers all the incomes gained from hired full-time employment (or earnings). The data come from the Polish Household Budget Surveys. The whole sample is broken down by the following categories: age, education, 10 occupations and 21 industries as well as by 16 provinces.

In the second step the globalization mechanisms affecting the shifts in earnings inequality are investigated. The research is based on the econometric models estimated by panel techniques. Polarization indices, calculated in the first step, are used as dependent variables. The first model allows to identify factors important in the direct mechanisms. A set of independent variables covers factors being of interest: exports, imports, and FDI, broken down by industries. The second model describes the indirect mechanisms through which globalization influences the distributional shifts via technological change and human capital improvement.