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Wages and Productivity Growth in a Competitive Industry

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  • Bester, Helmut
  • Petrakis, Emmanuel

Abstract

Our model studies the evolution of productivity growth in a competitive industry. The exogenous wage rate determines the firms' engagement in labour productivity enhancing process innovation. There is a unique steady state of the industry dynamics, which is globally stable. In the steady state, the number of active firms, their unit labour cost and supply depend on the growth rate but not on the level of the wage rate. In addition to providing comparative statics of the steady state, the paper characterizes the industry's adjustment path.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2031.

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Date of creation: Dec 1998
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Handle: RePEc:cpr:ceprdp:2031

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Keywords: industry dynamics; Process Innovation; Wages;

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References

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  1. Emmanuel Petrakis & Santanu Roy, 1998. "Cost Reducing Investment, Competition and Industry Dynamics," Tinbergen Institute Discussion Papers 98-011/1, Tinbergen Institute.
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  8. Hellwig, Martin & Irmen, Andreas, 2001. "Endogenous Technical Change in a Competitive Economy," Journal of Economic Theory, Elsevier, vol. 101(1), pages 1-39, November.
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  18. Jovanovic, Boyan & MacDonald, Glenn M, 1994. "The Life Cycle of a Competitive Industry," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 322-47, April.
  19. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  20. Lucas, Robert E, Jr & Prescott, Edward C, 1971. "Investment Under Uncertainty," Econometrica, Econometric Society, vol. 39(5), pages 659-81, September.
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