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The Linkage between Prices, Wages, and Labor Productivity: A Panel Study of Manufacturing Industries
Author(s) -
Strauss Jack,
Wohar Mark E.
Publication year - 2004
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.2004.tb00612.x
Subject(s) - productivity , economics , wage , panel data , efficiency wage , labour economics , granger causality , real wages , econometrics , macroeconomics
This article investigates the long‐run relationship between prices and wage‐adjusted productivity as well as between real wages and average labor productivity at the industry level for a panel of 459 U.S. manufacturing industries over the period 1956‐1996. Panel reintegration test results strongly reject the null of no reintegration in the panel between both prices and wage‐adjusted productivity and between labor productivity and real wages for many (but not all) industries. Granger‐causality tests show that prices are weakly exogenous and cause movements in unit labor cost. Bidirectional Granger causality is found between real wages and productivity; however, a one‐to‐one relationship is strongly rejected between real wages and productivity. Increases in labor productivity are associated with a less than unity increase in real wages.