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Influences of US real GDP growth and labour productivity on manufacturing real wages

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  • Muhammad Mustafa
  • Matiur Rahman

Abstract

This paper re-examines the dynamic casual nexus among real manufacturing wage rate, labour productivity and real GDP growth. Data from 1987 Q1 through 2011 Q2 are utilised by implementing the fairly standard cointegration methodology in a trivariate setting. All three variables are non-stationary depicting I (1) behaviour. There are evidences of at least one cointegrating relationship among the variables, based on both λtrace and λmax tests. The estimates of vector error-correction models show the weakest long-term causal flow from labour productivity and real GDP growth to real wage rate in the US manufacturing sector. Such causal flow is the strongest from manufacturing real wage rate and labour productivity to US real GDP growth. The influence of manufacturing real wage and real GDP growth on labour productivity falls in between. In all cases of vector error-correction models, there are evidences of short-run net positive interactive feedback effects in varying degrees.

Suggested Citation

  • Muhammad Mustafa & Matiur Rahman, 2013. "Influences of US real GDP growth and labour productivity on manufacturing real wages," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 5(3), pages 337-346.
    • Handle: RePEc:ids:ijecbr:v:5:y:2013:i:3:p:337-346
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