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The Relationship Between Wage Levels In The National Economy And Investment Activity In Agriculture (A Polish Case Study)

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  • KUSZ, DARIUSZ

Abstract

The relative prices of production factors influence farmers’ investment decisions. An increase in the price of labor relative to other production factors encourages its substitution with relatively cheaper capital. For this reason, one should expect a relationship between investment expenditures per person employed in agriculture and wage levels in the economy. The aim of this study was to examine the long-term relationship between investment expenditures per person employed in agriculture and the average gross wage in the national economy in Poland during the period 1995–2023. The dataset was obtained from the Central Statistical Office of Poland. The analysis applied time series cointegration methods using both the Engle–Granger and Johansen approaches. The Engle-Granger method did not confirm the existence of a cointegration relationship between the analyzed variables. In contrast, the Johansen test indicated the presence of such a relationship, with an estimated coefficient of β = -0.751, suggesting that a 1% increase in wages was associated, in the long run, with an approximately 0.751% increase in agricultural investment per person employed. The negative error correction coefficient (α = -0.146) for investment expenditures per person employed in agriculture confirmed that investments played a stabilizing role, adjusting to deviations from the long-term equilibrium. Based on the analysis of equilibrium residuals, it can be cautiously concluded that Polish agriculture during the period 1995-2023 was overinvested relative to wage levels in the national economy. It was also observed that agricultural policy instruments boosted farmers’ investment activity beyond the equilibrium implied by wage levels in the overall economy.

Suggested Citation

  • Kusz, Dariusz, 2025. "The Relationship Between Wage Levels In The National Economy And Investment Activity In Agriculture (A Polish Case Study)," Roczniki (Annals), Polish Association of Agricultural Economists and Agribusiness - Stowarzyszenie Ekonomistow Rolnictwa e Agrobiznesu (SERiA), vol. 2025(3).
    • Handle: RePEc:ags:paaero:401308
    DOI: 10.22004/ag.econ.401308
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