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Explaining the Rising Wage-Productivity Gap of the 1980s: Effects of Declining Employment and Unionization

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  • William D. Ferguson

    (Economics Department, Grinnell College, Grinnell, Iowa 501 12)

Abstract

This paper investigates causes of the dramatic increase in the wage-productivity gap—the divergence between the growth rates of aggregate productivity and real wages - in the post-1981 period. Using a two-step estimation procedure which incorporates three-digit industry wage regression coefficients into an aggregate wage growth identity equation, it finds that employment decline within unionized industries explains 18% of the post-1981 increase in the gap and that declining union ability to raise wages may explain as much as another 25%. Imports, on the other hand, do not appear to explain the gap independently of employment effects.

Suggested Citation

  • William D. Ferguson, 1996. "Explaining the Rising Wage-Productivity Gap of the 1980s: Effects of Declining Employment and Unionization," Review of Radical Political Economics, Union for Radical Political Economics, vol. 28(2), pages 77-115, June.
    • Handle: RePEc:sae:reorpe:v:28:y:1996:i:2:p:77-115
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