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Testing for Granger Causality in Quantiles Between the Wage Share and Capacity Utilization

Author

Listed:
  • Andre M. Marques
  • Gilberto Tadeu Lima

Abstract

This paper tests for Granger causality in quantiles between the wage share and capacity utilization in twelve advanced countries using annual data ranging from 1960 to 2019. Instead of focusing only on the conditional mean, we test for causality in the full conditional distribution of the variables of interest. This interestingly allows detecting causal relations in both the mean and the entire conditional distribution. Based on confidence intervals generated by bootstrap resampling and the Wald test for joint significance, our main statistically significant results are the following. Capacity utilization positively causes the wage share in seven out of the twelve sample countries. In these countries, the Granger causal effect of capacity utilization on the wage share is strong and heterogeneous across quantiles, it being larger for more extreme quantiles. Capacity utilization positively Granger causes the wage share in all conditional quantiles in the U.S. The wage share negatively Granger causes capacity utilization in most conditional quantiles in Spain. There is no significant Granger causality in either direction between capacity utilization and the wage share in Norway, Canada, Portugal, and Greece.

Suggested Citation

  • Andre M. Marques & Gilberto Tadeu Lima, 2021. "Testing for Granger Causality in Quantiles Between the Wage Share and Capacity Utilization," Working Papers, Department of Economics 2021_03, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2021wpecon03
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    More about this item

    Keywords

    Granger causality in distribution; quantile regression; bootstrap resampling; wage share; capacity utilization;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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