Wage-productivity gap in OECD economies

Ceyhun Elgin and Tolga Kuzubas

Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), 2013, vol. 7, No 2013-21, 21 pages

Abstract: The Walrasian theory of labor market equilibrium predicts that in the absence of any market frictions, workers earn a wage rate equal to their marginal productivity. In this paper, based on the neoclassical tradition, the authors define the ratio of the marginal product of labor to real wages as the Pigouvian exploitation rate and then construct a panel dataset of this specific wage-productivity gap for the manufacturing sector in OECD economies. Next, they investigate its relationship with the unemployment rate along with various other variables such as the government taxation, capital expansion, unionization, inflation. Their findings suggest that the wage-productivity gap gives a robust and significantly positive response to shocks to unemployment rate and a negative response to shocks to unionization.

Keywords: wages; marginal productivity of labor; panel-VAR; OECD economies (search for similar items in EconPapers)
JEL-codes: J24 J30 J64 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (12)

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Working Paper: Wage-productivity gap in OECD economies (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifweej:201321

DOI: 10.5018/economics-ejournal.ja.2013-21

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