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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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Related research

Keywords: industry dynamics; Process Innovation; Wages;

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References

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  16. Grout, Paul A, 1984. "Investment and Wages in the Absence of Binding Contracts: A Nash Bargining Approach," Econometrica, Econometric Society, vol. 52(2), pages 449-60, March.
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  18. Doms, Mark & Dunne, Timothy & Troske, Kenneth R, 1997. "Workers, Wages, and Technology," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 253-90, February.
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  23. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
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