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

Andre M. Marques () and Gilberto Lima

No 2021_03, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

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.

Keywords: Granger causality in distribution; quantile regression; bootstrap resampling; wage share; capacity utilization (search for similar items in EconPapers)
JEL-codes: C12 C32 E22 E25 (search for similar items in EconPapers)
Date: 2021-03-08
New Economics Papers: this item is included in nep-ecm and nep-mac
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