A note on the non-linear wages-productivity nexus for Malaysia

Tang, Chor Foon (2010): A note on the non-linear wages-productivity nexus for Malaysia.

Abstract

This study is to empirically investigate the effect of real wages on labour productivity in Malaysia’s manufacturing sector using annual data from 1980 to 2009. The Johansen’s test suggests that real wages and labour productivity are cointegrated. Moreover, productivity and real wages have a quadratic relationship (i.e. inverted-U shaped curve) instead of linear relationship. Hence, the effect of real wages on labour productivity is not monotonic. Furthermore, the Granger causality test indicates that real wages and labour productivity is bilateral causality in nature.

• Item Type: MPRA Paper
• Language: English
• Keywords: Causality; Cointegration; Malaysia; Wages-Productivity
• Subjects: J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J30 - General

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