Linkage and Causality between Wages and Productivity: A Panel Analysis of U.S. Manufacturing in the Interwar Period
(2013) EKHR92 20131Department of Economic History
- Abstract (Swedish)
- This paper analyses the linkage and causality between real wages and labour productivity. Higher real wage growth can raise the incentive of firms to save labour,thereby increasing output per hour worked. Cointegration analysis of a panel of 19 manufacturing industries in the United States for the years 1919 - 1939 suggests strong linkage and bidirectional Granger causality between the two variables. To overcome
the endogeneity between wages and productivity I propose an instrumental variable approach. The rate of unionization in an industry can raise real wages above trend,while not directly affecting labour productivity. Instrumenting real wages with
unionization suggeststhat a ten per cent increase in real wage growth raises labour... (More) - This paper analyses the linkage and causality between real wages and labour productivity. Higher real wage growth can raise the incentive of firms to save labour,thereby increasing output per hour worked. Cointegration analysis of a panel of 19 manufacturing industries in the United States for the years 1919 - 1939 suggests strong linkage and bidirectional Granger causality between the two variables. To overcome
the endogeneity between wages and productivity I propose an instrumental variable approach. The rate of unionization in an industry can raise real wages above trend,while not directly affecting labour productivity. Instrumenting real wages with
unionization suggeststhat a ten per cent increase in real wage growth raises labour productivity growth by 1.2 to 6.6 per cent. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/3878913
- author
- Adam, Marc LU
- supervisor
- organization
- course
- EKHR92 20131
- year
- 2013
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- Labour productivity growth, real wage growth, unionization, interwar period
- language
- English
- id
- 3878913
- date added to LUP
- 2013-08-23 15:38:44
- date last changed
- 2013-08-23 15:38:44
@misc{3878913, abstract = {{This paper analyses the linkage and causality between real wages and labour productivity. Higher real wage growth can raise the incentive of firms to save labour,thereby increasing output per hour worked. Cointegration analysis of a panel of 19 manufacturing industries in the United States for the years 1919 - 1939 suggests strong linkage and bidirectional Granger causality between the two variables. To overcome the endogeneity between wages and productivity I propose an instrumental variable approach. The rate of unionization in an industry can raise real wages above trend,while not directly affecting labour productivity. Instrumenting real wages with unionization suggeststhat a ten per cent increase in real wage growth raises labour productivity growth by 1.2 to 6.6 per cent.}}, author = {{Adam, Marc}}, language = {{eng}}, note = {{Student Paper}}, title = {{Linkage and Causality between Wages and Productivity: A Panel Analysis of U.S. Manufacturing in the Interwar Period}}, year = {{2013}}, }