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

Soo Khoon Goh and Koi Wong

No 12-10, Monash Economics Working Papers from Monash University, Department of Economics

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.

Keywords: Real wages; productivity; Malaysia (search for similar items in EconPapers)
JEL-codes: J39 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2010-05
New Economics Papers: this item is included in nep-lab and nep-sea
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Citations: View citations in EconPapers (6)

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