Real wages and labor-saving technical change: evidence from a panel of manufacturing industries in mature and labor-surplus economies

Arbeitspapier

This paper uses panel cointegration and error correction models to unveil the direction of long-run causality between the real product wage and labor productivity at the industry level. I use two datasets of manufacturing industries: the EU-Klems dataset covering 11 industries in 19 developed economies, and the Unido Industrial Statistics Database covering 22 industries in 30 developed and developing economies. In both datasets, I find evidence of cointegration between the two variables, as well as evidence of two-way, long-run Granger causality. These findings are consistent with theories of directed technical change, which claim that a rise in labor costs sparks the adoption of labor-saving innovations. They are also consistent with distributive theories whereby real wages keep apace of labor productivity growth, giving rise to long-run stability in functional distribution.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2014-03

Classification and Topics

• Classification: Wirtschaft ; Aggregate Factor Income Distribution ; Technological Change: Choices and Consequences; Diffusion Processes
• Subject: Technological Change ; Wage Shares ; Labor Productivity ; Panel Cointegration

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): de Souza, Joao Paulo A.
• Event: Veröffentlichung
• (who): University of Massachusetts, Department of Economics
• (where): Amherst, MA
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/105781
• Last update: 10.03.2025, 11:42 AM CET