Regional Determinants of Average Wage in Romania

The economic crisis has conveyed a new set of challenges for the labour market, one of its most socially negative effects being the decline in real wages. In this context our paper attempts to explain the wage determinants in Romania from a territorial perspective. We examine the spatial correlation between real wage earnings and various regional characteristics in the framework of a panel data model. This technique allows controlling for region-specific differences in the factors of influence included in the wage model. We test the hypothesis that average regional wages are positively related to the economic performance of the regions. The empirical analysis has covered the 1995-2010 period and our empirical estimations confirmed the significant role of the development level, captured by GDP/capita, on regional wage determination in Romania on the long-run.