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Is Productivity Linked To Wages? An Empirical Investigation in Malaysia

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  • Goh, Soo Khoon
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    Abstract

    This study investigates the relationship between real wages, labor productivity and unemployment in Malaysia at the macroeconomic level, using time-series econometric techniques. The study found a long-term equilibrium relationship between labor productivity and real wages, but that unemployment was apparently unconnected to the system. The results suggested that labor productivity is positively related to real wage in the long run. However, the increase in real wage exceeds the increase in labor productivity causing an increase in unit labor cost. In addition, the study found a positive causal flow from productivity to wages in the short-run supporting the marginal productivity theory.

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    File URL: http://mpra.ub.uni-muenchen.de/18095/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18095.

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    Date of creation: Aug 2009
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    Handle: RePEc:pra:mprapa:18095

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    Keywords: real wages; productivity; Malaysia;

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    1. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
    2. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    3. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc.
    4. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
    5. B Bell & Stephen Nickell & Glenda Quintini, 2000. "Wage Equations, Wage Curves and All That," CEP Discussion Papers dp0472, Centre for Economic Performance, LSE.
    6. Premachandra Athukorala & Jayant Menon, 1995. "Developing with Foreign Investment: Malaysia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 28(1), pages 9-22.
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