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Real wages, inflation and labour productivity in Australia

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  • Saten Kumar
  • Don J. Webber
  • Geoff Perry

Abstract

This article 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 to 2007 period corroborate the presence of a structural break in 1985 and show that a 1% increase in manufacturing sector real wages led to an increase in manufacturing sector productivity of between 0.5% and 0.8%. 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.

Suggested Citation

  • Saten Kumar & Don J. Webber & Geoff Perry, 2012. "Real wages, inflation and labour productivity in Australia," Applied Economics, Taylor & Francis Journals, vol. 44(23), pages 2945-2954, August.
  • Handle: RePEc:taf:applec:44:y:2012:i:23:p:2945-2954
    DOI: 10.1080/00036846.2011.568405
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    1. repec:ere:journl:v:xxxvi:y:2017:i:2:p:185-228 is not listed on IDEAS
    2. Josheski, Dushko & Bardarova, Snezana, 2013. "Causal relationship between wages and prices in R. Macedonia: VECM analysis," MPRA Paper 48179, University Library of Munich, Germany.
    3. repec:eme:rpeczz:s0161-723020170000032006 is not listed on IDEAS
    4. 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.
    5. Antonio Paradiso & Saten Kumar & B. Bhaskara Rao, 2013. "A New Keynesian IS curve for Australia: is it forward looking or backward looking?," Applied Economics, Taylor & Francis Journals, vol. 45(26), pages 3691-3700, September.
    6. Sangjun Jeong, 2017. "Biased Technical Change and Economic Growth: The Case of Korea, 1970–2013," Research in Political Economy,in: Return of Marxian Macro-Dynamics in East Asia, volume 32, pages 81-103 Emerald Publishing Ltd.
    7. Nir Klein, 2012. "Real Wage, Labor Productivity, and Employment Trends in South Africa; A Closer Look," IMF Working Papers 12/92, International Monetary Fund.
    8. Chaido Dritsaki, 2016. "Real wages, inflation, and labor productivity: Evidences from Bulgaria and Romania," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 4(5), pages 24-36, October.

    More about this item

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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