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Wages and Productivity Growth in a Competitive Industry

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  • Helmut Bester
  • Emmanuel Petrakis

Abstract

We describe the evolution of productivity growth in a competitive industry. The exogenous wage rate determines the firms' engagement in labor productivity enhancing process innovation. There is a unique steady state of the industry dynamics, which is globally stable. In the steady state, the number of active firms, their unit labor cost and supply depend on the growth rate but not on the level of the wage rate. In addition to providing comparative statics of the steady state, the paper characterizes the industry's adjustment path.

Suggested Citation

  • Helmut Bester & Emmanuel Petrakis, "undated". "Wages and Productivity Growth in a Competitive Industry," Papers 009, Departmental Working Papers.
    • Handle: RePEc:bef:lsbest:009
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    More about this item

    Keywords

    process innovation; industry dynamics; wages;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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