Do Those Who Stay Work Less? On the Impact of Emigration on the Measured TFP in Poland

The measured TFP growth in Poland slowed from around 4% in the second half of the 90s to 2% a decade later. This reduction in the growth rate of the Solow residual is argued to reflect the evolution of worker effort and, indirectly, of the labour market within the period. The unobserved worker effort is identified within a structural efficiency wage model with shirking. The model estimates suggest that a reduction in the generosity of the unemployment benefit system and the stabilization of the job destruction rate before 2000 reinforced worker motivation. In turn, the economic revival and the intensification of emigration around the date of the Polish accession to the European Union undermined it. Consequently, a steep increase in worker effort before 2000 temporarily boosted the measured TFP growth. A levelling off and the eventual correction of effort after 2000 depressed the observed TFP growth rates. Around 15% of the estimated decline in GDP tied to an increase in emigration after 2004 can be attributed to negative changes in worker discipline