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Real wages, inflation and labour productivity in Australia

Author

Listed:
  • Saten Kumar

    (Department of Business Economics, Auckland University of Technology)

  • Don J. Webber

    () (Department of Business Economics, Auckland University of Technology and Department of Economics, UWE, Bristol)

  • Geoff Perry

    (Department of Business Economics, Auckland University of Technology)

Abstract

This paper presents an analysis of real wages, inflation and labour productivity interrelationships using cointegration, Granger-causality and, most importantly, structural change tests. Applications of tests to Australian data over the 1965-2007 period corroborate the presence of a structural break in 1985 and show that a 1 percent increase in manufacturing sector real wages led to an increase in manufacturing sector productivity of between 0.5 and 0.8 percent. Comparable estimates for the effect of inflation on manufacturing sector productivity have limited statistical significance. Granger causality test results suggest that real wages and inflation both Granger-cause productivity in the long run.

Suggested Citation

  • Saten Kumar & Don J. Webber & Geoff Perry, 2009. "Real wages, inflation and labour productivity in Australia," Working Papers 0921, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  • Handle: RePEc:uwe:wpaper:0921
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    File URL: http://carecon.org.uk/DPs/0921.pdf
    File Function: First version, 2009
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    References listed on IDEAS

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    Cited by:

    1. Josheski, Dushko & Lazarov, Darko & Fotov, Risto & Koteski, Cane, 2011. "Causal relationship between wages and prices in UK: VECM analysis and Granger causality testing," MPRA Paper 34095, University Library of Munich, Germany.

    More about this item

    Keywords

    Labour productivity; Real wages; Inflation; Cointegration; Granger causality;

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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