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Analyzing the Productivity-Wage-Unemployment Nexus in Malaysia: Evidence from the Macroeconomic Perspective

Author

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  • Soo Khoon Goh
  • Koi Nyen Wong

Abstract

Using multivariate cointegration and error-correction modeling techniques, this paper attempts to examine whether there exists a productivity-wageunemployment relationship in Malaysia at the macroeconomic level. The main findings show that unemployment is dichotomized from the long-run equilibrium relationship between labor productivity and real wages, implying labor productivity is an important long-run factor in determining real wages, while unemployment has negligible effect on the real wage rates. However, the real wages are very responsive to a change in labor productivity, signaling the labor market is tight that leads to an increase in unit labor cost. To be more resilient to rising wages and productivity gap in a globally competitive environment, the Malaysian industries should move up the value chain, and promote skill- and technology-intensive production.

Suggested Citation

  • 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.
  • Handle: RePEc:mos:moswps:2010-12
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2010/1210productivitygohwong.pdf
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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. repec:eee:rujoec:v:3:y:2017:i:4:p:411-424 is not listed on IDEAS
    3. Nir Klein, 2012. "Real Wage, Labor Productivity, and Employment Trends in South Africa; A Closer Look," IMF Working Papers 12/92, International Monetary Fund.

    More about this item

    Keywords

    Real wages; productivity; Malaysia;

    JEL classification:

    • J39 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Other

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