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Wages and Productivity Growth in a Competitive Industry

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  • Bester, Helmut
  • Petrakis, Emmanuel

Abstract

The model studies the evolution of productivity growth in a compehtlve 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 globaIly 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

  • Bester, Helmut & Petrakis, Emmanuel, 1998. "Wages and Productivity Growth in a Competitive Industry," UC3M Working papers. Economics 4142, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:4142
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    Cited by:

    1. Bester, Helmut & Petrakis, Emmanuel, 2004. "Wages and productivity growth in a dynamic monopoly," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 83-100, January.
    2. Irmen, Andreas, 2011. "Steady-state growth and the elasticity of substitution," Journal of Economic Dynamics and Control, Elsevier, vol. 35(8), pages 1215-1228, August.
    3. Encaoua, David & Guellec, Dominique & Martinez, Catalina, 2006. "Patent systems for encouraging innovation: Lessons from economic analysis," Research Policy, Elsevier, vol. 35(9), pages 1423-1440, November.
    4. Vesna Stavrevska, 2011. "The efficiency wages perspective to wage rigidity in the open economy: a survey," International Journal of Manpower, Emerald Group Publishing Limited, vol. 32(3), pages 273-299, June.
    5. Andreas Irmen, 2008. "Cross-Country Income Differences and Technology Diffusion in a Competitive World," CESifo Working Paper Series 2504, CESifo.
    6. Constantine Manasakis & Emmanuel Petrakis, 2009. "Union structure and firms' incentives for cooperative R&D investments," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 665-693, May.
    7. Zamparelli, Luca, 2022. "On Labor Productivity Growth and the Wage Share with Endogenous Size and Direction of Technical Change," MPRA Paper 112684, University Library of Munich, Germany.
    8. Heer, Burkhard & Irmen, Andreas, 2014. "Population, pensions, and endogenous economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 46(C), pages 50-72.
    9. Luca Zamparelli, 2015. "Induced Innovation, Endogenous Technical Change and Income Distribution in a Labor-Constrained Model of Classical Growth," Metroeconomica, Wiley Blackwell, vol. 66(2), pages 243-262, May.
    10. repec:awi:wpaper:0480 is not listed on IDEAS
    11. Vincenzo Denicolò & Piercarlo Zanchettin, 2017. "Speculative Profits, Innovation, And Growth," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 160-174, January.
    12. Laura Policardo & Lionello F. Punzo & Edgar J. Sanchez Carrera, 2019. "On the wage–productivity causal relationship," Empirical Economics, Springer, vol. 57(1), pages 329-343, July.
    13. Ekaterina Ponomareva & Alexandra Bozhechkova & Alexandr Knobel, 2012. "Factors of Economic Growth," Published Papers 172, Gaidar Institute for Economic Policy, revised 2013.
    14. zamparelli, luca, 2008. "Direction and intensity of technical change: a micro-founded growth model," MPRA Paper 10843, University Library of Munich, Germany.
    15. Bester, Helmut & Milliou, Chrysovalantou & Petrakis, Emmanuel, 2009. "Wages and productivity growth in a dynamic oligopoly," Discussion Papers 2009/18, Free University Berlin, School of Business & Economics.
    16. Irmen, Andreas, 2009. "Population Aging and the Direction of Technical Change," Working Papers 0493, University of Heidelberg, Department of Economics.
    17. Zamparelli, Luca, 2024. "On the positive relation between the wage share and labor productivity growth with endogenous size and direction of technical change," Economic Modelling, Elsevier, vol. 131(C).
    18. Bester, Helmut & Milliou, Chrysovalantou & Petrakis, Emmanuel, 2012. "Wage bargaining, productivity growth and long-run industry structure," Labour Economics, Elsevier, vol. 19(6), pages 923-930.
    19. Irmen, Andreas, 2005. "Extensive and intensive growth in a neoclassical framework," Journal of Economic Dynamics and Control, Elsevier, vol. 29(8), pages 1427-1448, August.
    20. Luca Zamparelli, 2009. "Direction and Intensity of Technical Change: a Micro Model," Working Papers 4, Doctoral School of Economics, Sapienza University of Rome.
    21. Xiangjin Shen & Shiliang Li & Hiroki Tsurumi, 2013. "Comparison of Parametric and Semi-Parametric Binary Response Models," Departmental Working Papers 201308, Rutgers University, Department of Economics.
    22. Xiangjin Shen & Iskander Karibzhanov & Hiroki Tsurumi & Shiliang Li, 2022. "Comparison of Bayesian and Sample Theory Parametric and Semiparametric Binary Response Models," Staff Working Papers 22-31, Bank of Canada.
    23. Lingens, Jorg, 2007. "Unions, wage setting, and economic growth," Economic Modelling, Elsevier, vol. 24(1), pages 167-188, January.
    24. repec:awi:wpaper:0479 is not listed on IDEAS

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    More about this item

    Keywords

    Process innovation;

    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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