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Real Wage, Labor Productivity, and Employment Trends in South Africa; A Closer Look

  • Nir Klein
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    The paper looks at the dynamics of employment in South Africa and examines the factors that contributed to the job-shedding observed during the recent financial crisis. The paper finds that the rapid growth of the real wage, which outpaced the labor productivity growth in most sectors, played an important role in suppressing employment creation. The paper also finds that while there is a co-integrating link between the real wage and labor productivity, the deviations from equilibrium are persistent and thus contribute to a weak link between real wage growth and labor productivity growth in the short term. This finding is also supported by a cross-country analysis, which shows that in South Africa the link between the real wage and labor productivity is substantially weaker than in other emerging markets, even after controlling for labor market tightness indicators.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/92.

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    Length: 28
    Date of creation: 01 Apr 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/92
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    1. Michael Bruno & Jeffrey D. Sachs, 1985. "Economics of Worldwide Stagflation," NBER Books, National Bureau of Economic Research, Inc, number brun85-1, 07.
    2. 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.
    3. Bentollia, S. & Saint-Paul, G., 1999. "Explaining Movements in the Labor Share," Papers 9905, Centro de Estudios Monetarios Y Financieros-.
    4. Junankar, Pramod N. (Raja) & Madsen, Jakob B., 2004. "Unemployment in the OECD: Models and Mysteries," IZA Discussion Papers 1168, Institute for the Study of Labor (IZA).
    5. JW Fedderke & Martine Mariotti, 2002. "Changing Labour Market Conditions In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 70(5), pages 830-864, 06.
    6. Soo Khoon Goh & Koi Nyen Wong, 2010. "Analyzing the Productivity-Wage-Unemployment Nexus in Malaysia: Evidence from the Macroeconomic Perspective," Monash Economics Working Papers 12-10, Monash University, Department of Economics.
    7. Love, Inessa & Zicchino, Lea, 2006. "Financial development and dynamic investment behavior: Evidence from panel VAR," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 190-210, May.
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