Reconsidering the conventional wisdom on wage increases, the choice of technique and employment

Angelo Reati

Cambridge Journal of Economics, 2002, vol. 26, issue 2, 179-200

Abstract: This paper provides a critical assessment of the neoclassical hypothesis that an increase in the relative price of labour with respect to the price of capital produces a substitution for labour by machinery, thus reducing employment. Several cases of non-uniform wages--in terms of structure as well as in terms of changes--are examined, for both a closed and an open economy. The general conclusion is that, although we cannot rule out instances in which the neoclassical mechanism operates, a priori it is not possible to consider that this represents the general case. Copyright 2002, Oxford University Press.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:oup:cambje:v:26:y:2002:i:2:p:179-200

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