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Real Wages and Employment: A Sceptical View of Some Recent Empirical Work

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  • Anyadike-Danes, Michael
  • Godley, Wynne

Abstract

A number of recent empirical studies have found real wages to have significant (and negative) coefficients when included in employment equations, a result which has been held to be consistent with, or even evidence for, a causal relationship. In this paper, the authors suggest a number of alternative mechanisms which could generate the same finding. They illustrate the point by estimating "employment" functions using constructed data, which embody well-defined relationships between random numbers; these habitually generate the familiar negative coefficients on "real wages" even though the link between real wages and employment, via profit maximization and a production function, is ruled out by construction. Copyright 1989 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Anyadike-Danes, Michael & Godley, Wynne, 1989. "Real Wages and Employment: A Sceptical View of Some Recent Empirical Work," The Manchester School of Economic & Social Studies, University of Manchester, vol. 57(2), pages 172-187, June.
    • Handle: RePEc:bla:manch2:v:57:y:1989:i:2:p:172-87
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    Cited by:

    1. Jesus Felipe & John McCombie, 2012. "Problems with Regional Production Functions and Estimates of Agglomeration Economies: A Caveat Emptor for Regional Scientists," Economics Working Paper Archive wp_725, Levy Economics Institute.
    2. Antonella Stirati, 2001. "Inflation, Unemployment and Hysteresis: An alternative view," Review of Political Economy, Taylor & Francis Journals, vol. 13(4), pages 427-451.
    3. Engelbert Stockhammer, 2011. "Wage norms, capital accumulation, and unemployment: a post-Keynesian view," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 27(2), pages 295-311.
    4. Sergio Cesaratto & Franklin Serrano & Antonella Stirati, 2003. "Technical Change, Effective Demand and Employment," Review of Political Economy, Taylor & Francis Journals, vol. 15(1), pages 33-52.
    5. Jesus Felipe & John S.L. McCombie, 2013. "The Aggregate Production Function and the Measurement of Technical Change," Books, Edward Elgar Publishing, number 1975.
    6. Engelbert Stockhammer & Alexander Guschanski & Karsten Köhler, 2014. "Unemployment, capital accumulation and labour market institutions in the Great Recession," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 11(2), pages 182-194, September.

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