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A note on the nonlinear wages-productivity nexus for Malaysia

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  • Tang, Chor Foon

Abstract

This study is to empirically investigate the effect of real wages on productivity in Malaysia using monthly data from January 1983 to November 2009. The Johansen’s test suggests that wages and productivity are cointegrated. Moreover, productivity and real wages have a quadratic relationship in the long run (i.e., inverse-U shape curve) instead of linear relationship. Hence, the effect of real wages on productivity is not monotonic. Furthermore, the Granger causality test indicates that real wages and productivity is bilateral causality in nature.

Suggested Citation

  • Tang, Chor Foon, 2010. "A note on the nonlinear wages-productivity nexus for Malaysia," MPRA Paper 24355, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24355
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    File URL: https://mpra.ub.uni-muenchen.de/27286/1/MPRA_paper_27286.pdf
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    References listed on IDEAS

    as
    1. Junsoo Lee & Mark C. Strazicich, 2013. "Minimum LM unit root test with one structural break," Economics Bulletin, AccessEcon, vol. 33(4), pages 2483-2492.
    2. 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.
    3. Alexander, Carol O, 1993. "The Changing Relationship between Productivity, Wages and Unemployment in the UK," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(1), pages 87-102, February.
    4. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
    5. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
    6. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
    7. Su Zhou, 2001. "The Power of Cointegration Tests Versus Data Frequency and Time Spans," Southern Economic Journal, Southern Economic Association, vol. 67(4), pages 906-921, April.
    8. Paresh Narayan & Russell Smyth, 2009. "The effect of inflation and real wages on productivity: new evidence from a panel of G7 countries," Applied Economics, Taylor & Francis Journals, vol. 41(10), pages 1285-1291.
    9. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
    10. Victor Montuenga-Gomez & Melchor Fernandez & Andres Romeu, 2007. "The Link Between Wages and Productivity in Spain," International Review of Applied Economics, Taylor & Francis Journals, vol. 21(2), pages 247-272.
    11. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    12. Millea, Meghan & Fuess, Scott Jr., 2005. "Does pay affect productivity or react to it?: Examination of U.S. manufacturing," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(4-5), pages 796-807, September.
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    Cited by:

    1. Jhon Alexánder Méndez Sayago & Leonardo Vera Azaf, 2015. "Salarios, incentivos y producción intelectual docente en la universidad pública en Colombia," REVISTA APUNTES DEL CENES, UNIVERSIDAD PEDAGOGICA Y TECNOLOGICA DE COLOMBIA, vol. 34(60), pages 95-130, December.
    2. Jhon Alexánder Méndez Sayago & Leonardo Vera Azaf, 2015. "Salaries, incentives and teaching intellectual production in the public university in Colombia," REVISTA APUNTES DEL CENES, UNIVERSIDAD PEDAGOGICA Y TECNOLOGICA DE COLOMBIA, vol. 34(60), pages 95-130, June.

    More about this item

    Keywords

    Causality; Cointegration; Malaysia; Wages-Productivity;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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