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The productivity-wage relationship in South Africa: an empirical investigation

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  • Jeremy Wakeford

Abstract

This article investigates the relationship between labour productivity, average real wages and the unemployment rate in South Africa at the macroeconomic level, using time-series econometric techniques. There is strong evidence of a structural break in 1990, after which time all three variables rose rapidly. The break appears to have negatively affected the level of employment in the first instance, and subsequently fed through into per worker wages and productivity. A long-term equilibrium (cointegrating) relationship was found between real wages and productivity, but unemployment was apparently unconnected to the system, which lends support to the insider-outsider theory. A long-term wage-productivity elasticity of 0,58 indicates that productivity has grown more rapidly than wages, which is consistent with the finding that labour's share of gross output has been shrinking over the past decade. These trends may be explained plausibly by the adoption of job-shedding technology and capital intensification.

Suggested Citation

  • Jeremy Wakeford, 2004. "The productivity-wage relationship in South Africa: an empirical investigation," Development Southern Africa, Taylor & Francis Journals, vol. 21(1), pages 109-132.
  • Handle: RePEc:taf:deveza:v:21:y:2004:i:1:p:109-132
    DOI: 10.1080/0376835042000181444
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    Citations

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    Cited by:

    1. repec:ere:journl:v:xxxvi:y:2017:i:2:p:185-228 is not listed on IDEAS
    2. Dieter von Fintel, 2017. "Institutional wage-setting, labour demand and labour supply: Causal estimates from a South African pseudo-panel," Development Southern Africa, Taylor & Francis Journals, vol. 34(1), pages 1-16, January.
    3. Chor Foon Tang, 2012. "The non-monotonic effect of real wages on labour productivity: New evidence from the manufacturing sector in Malaysia," International Journal of Social Economics, Emerald Group Publishing, vol. 39(6), pages 391-399, May.
    4. Melike Bildirici & Elçin Aykaç Alp, 2012. "Minimum wage is efficient wage in Turkish labor market: TAR–cointegration analysis," Quality & Quantity: International Journal of Methodology, Springer, vol. 46(4), pages 1261-1270, June.
    5. Freddy, Liew, 2011. "Productivity-wage-growth nexus: an empirical study of Singapore," MPRA Paper 34459, University Library of Munich, Germany.
    6. Saten Kumar & Don J. Webber & Geoff Perry, 2009. "Real wages, inflation and labour productivity in Australia," Working Papers 0921, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    7. 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.
    8. Tang, Chor Foon, 2010. "A note on the nonlinear wages-productivity nexus for Malaysia," MPRA Paper 24355, University Library of Munich, Germany.
    9. Jeremy Wakeford, 2004. "Productivity, Wages and Employment in South Africa’s Manufacturing Sector, 1970-2002," Working Papers 04085, University of Cape Town, Development Policy Research Unit.
    10. Sparrow, G.N. & Ortmann, Gerald F. & Lyne, Michael C. & Darroch, Mark A.G., 2008. "Determinants of the demand for regular farm labour in South Africa, 1960-2002," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(1), March.
    11. repec:eee:rujoec:v:3:y:2017:i:4:p:411-424 is not listed on IDEAS
    12. 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.

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