Productivity spillovers and the productivity–compensation gap

Shishir Shakya and Alicia Plemmons

Spatial Economic Analysis, 2022, vol. 17, issue 3, 354-369

Abstract: Historically, compensation and productivity steadily trended synchronously with one another. However, since the mid-1970s, these two measures have diverged as productivity increases have outpaced compensation. This divergence is indicative of evidence of wage stagnation and rising income inequality. We provide arguments on the productivity–compensation gap and illuminate possible explanations about whether and why the gap exists in different industries incorporating spatial and trade networks. We confirm that the gap narrows once we account for productivity spillovers between bordering and trading states using spatially lagged X (SLX) models. The results vary across industries and provide insights for policymakers and firms about productivity and compensation patterns.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:taf:specan:v:17:y:2022:i:3:p:354-369

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DOI: 10.1080/17421772.2021.2020889

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