Real Wages and Employment: A Sceptical View of Some Recent Empirical Work

Michael Anyadike-Danes and Wynne Godley

The Manchester School of Economic & Social Studies, 1989, vol. 57, issue 2, 172-87

Abstract: A number of recent empirical studies have found real wages to have significant (and negative) coefficients when included in employment equations, a result which has been held to be consistent with, or even evidence for, a causal relationship. In this paper, the authors suggest a number of alternative mechanisms which could generate the same finding. They illustrate the point by estimating "employment" functions using constructed data, which embody well-defined relationships between random numbers; these habitually generate the familiar negative coefficients on "real wages" even though the link between real wages and employment, via profit maximization and a production function, is ruled out by construction. Copyright 1989 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:57:y:1989:i:2:p:172-87

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