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Real Wages, Inflation and Labour Productivity in Australia

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  • Kumar, Saten
  • Webber, Don J.
  • Perry, Geoff

Abstract

This paper presents an analysis of real wages, inflation and labour productivity interrelationships using cointegration, Granger-causality and, most importantly, structural change tests. Applications of tests to Australian data over the 1965-2007 period corroborate the presence of a structural break in 1985 and show that a 1 percent increase in manufacturing sector real wages led to an increase in manufacturing sector productivity of between 0.5 and 0.8 percent. Comparable estimates for the effect of inflation on manufacturing sector productivity have limited statistical significance. Granger causality test results suggest that real wages and inflation both Granger-cause productivity in the long run.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19293.

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Date of creation: 16 Nov 2009
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Handle: RePEc:pra:mprapa:19293

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Keywords: Labour productivity; Real wages; Inflation; Cointegration; Granger causality;

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Cited by:
  1. Nir Klein, 2012. "Real Wage, Labor Productivity, and Employment Trends in South Africa," IMF Working Papers 12/92, International Monetary Fund.
  2. Josheski, Dushko & Lazarov, Darko & Fotov, Risto & Koteski, Cane, 2011. "Causal relationship between wages and prices in UK: VECM analysis and Granger causality testing," MPRA Paper 34095, University Library of Munich, Germany.
  3. Josheski, Dushko & Bardarova, Snezana, 2013. "Causal relationship between wages and prices in R. Macedonia: VECM analysis," MPRA Paper 48179, University Library of Munich, Germany.

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