Freddy, Liew (2011): Productivity-wage-growth nexus: an empirical study of Singapore.
Download (468kB) | Preview
This paper investigates the empirical relationship between labor productivity, real wages and real GDP in Singapore from 1997 to 2011. The paper begins with a review of productivity, wage and growth situations in Singapore in the past decade and further attempts to uncover the underlying relationship in this nexus using theoretical framework from labor and growth literature. Using the Vector-Autoregressive or Vector-Error Correction Mechanism when cointegration is present, this paper uncovers various causality relations in different industries which conform to economic theory and empirics. An impulse response analysis is also undertaken to understand how specific policy decisions could be framed to provide for higher wages across industries. The empirical results suggest that in the Singapore economy, there exist a bi-directional causality relation between labor productivity and real GDP but that wages seem to be caused by other underlying factors. However, real wages respond positively to positive shocks in the real GDP or labor productivity using cholesky or generalized decomposition. This paper concludes by discussing policies that could be undertaken to promote inclusive growth in the environment of sustained economic growth.
|Item Type:||MPRA Paper|
|Original Title:||Productivity-wage-growth nexus: an empirical study of Singapore|
|Keywords:||Causality, Productivity, Wage, Economic Growth, Singapore|
|Subjects:||C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes
O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J30 - General
|Depositing User:||Freddy Liew|
|Date Deposited:||03. Nov 2011 12:26|
|Last Modified:||22. Oct 2015 14:07|
Akerlof, G. A. and J. L. Yellen (1990). "The fair wage-effort hypothesis and unemployment." The Quarterly Journal of Economics 105(2): 255.
Atesoglu, H. S. and J. Smithin (2006). "Real wages, productivity and economic growth in the G7, 1960--2002." Review of Political Economy 18(2): 223-233.
Barros, A. R. (1993). "Real wages and economic growth: a structuralist hypothesis in an endogenous growth model." Working Papers.
Blanchard, O. J. and L. F. Katz (1999). Wage dynamics: reconciling theory and evidence, National Bureau of Economic Research Cambridge, Mass., USA.
Chow, G. C. (1968). "The acceleration principle and the nature of business cycles." The Quarterly Journal of Economics 82(3): 403.
Edin, P. A. and R. Topel (1997). Wage policy and restructuring: the Swedish labor market since 1960, University of Chicago Press.
Erixon, L. and S. u. N. institutionen (1997). The golden age of the Swedish Model: The coherence between capital accumulation and economic policy in Sweden in the early postwar period, Institute for Social Research.
Feldstein, M. (2008). "Did wages reflect growth in productivity?" Journal of Policy Modeling 30(4): 591-594.
Fields, G. S. and H. Wan (1989). "Wage-setting institutions and economic growth." World Development 17(9): 1471-1483.
Granger, C. W. J. (1969). "Investigating causal relations by econometric models and cross-spectral methods." Econometrica: Journal of the Econometric Society: 424-438.
Hall, R. E. and D. M. Lilien (1980). Efficient wage bargains under uncertain supply and demand, National Bureau of Economic Research Cambridge, Mass., USA.
Haltiwanger, J. C., J. I. Lane, et al. (2007). "Wages, productivity, and the dynamic interaction of businesses and workers." Labour Economics 14(3): 575-602.
Jorgenson, D. W. (1991). Productivity and economic growth, University of Chicago Press.
Kaldor, N. (1959). "Economic growth and the problem of inflation." Economica 26(104): 287-298.
Kumar, S. and R. R. Russell (2002). "Technological change, technological catch-up, and capital deepening: relative contributions to growth and convergence." American Economic Review: 527-548.
Mortensen, D. T. and C. A. Pissarides (1999). "New developments in models of search in the labor market." Handbook of labor economics 3: 2567-2627.
Narayan, P. and R. Smyth (2009). "The effect of inflation and real wages on productivity: newevidence from a panel of G7 countries." Applied economics 41(10): 1285-1291.
Phillips, A. W. (1954). "Stabilisation policy in a closed economy." The Economic Journal 64(254): 290-323.
Solow, R. M. (1956). "A contribution to the theory of economic growth." The Quarterly Journal of Economics 70(1): 65.
Toda, H. Y. and T. Yamamoto (1995). "Statistical inference in vector autoregressions with possibly integrated processes* 1." Journal of econometrics 66(1-2): 225-250.
Wakeford, J. (2004). "The productivity-wage relationship in South Africa: An empirical investigation." Development Southern Africa 21(1): 109-132.
Wong, S. T. and O. L. Heng (2001). "First World Per Capita Income but Third World IncomeStructure? Wage Share and Productivity Improvement in Singapore." Singapore: Statistics Singapore Newletter.