A Tale of Two Peripheries: Real Wages in Denmark and New Zealand 1875–1939.

Abstract

Denmark achieved dramatic real wage growth after 1870, compared to other European economies and to those of the New World. The ingredients of Denmark's success are gauged by comparison with one its major competitors in the British food-products markets, New Zealand. Faster Danish productivity growth explains only part of Denmark's faster real wage growth. Open economy forces, chiefly international capital flows before 1913, and especially Danish trade union militancy around the end of World War I, influenced income distribution and especially favoured wages over property income in Denmark. Denmark's GDP per capita equalled New Zealand levels between the world wars but her real wages surged past those of New Zealand as distributional shifts favoured Denmark's wage earners.     

The productivity–wage relationship in South Africa: an empirical investigation

This article investigates the relationship between labour productivity, average real wages and the unemployment rate in South Africa at the macroeconomic level, using time‐series econometric techniques. There is strong evidence of a structural break in 1990, after which time all three variables rose rapidly. The break appears to have negatively affected the level of employment in the first instance, and subsequently fed through into per worker wages and productivity. A long‐term equilibrium (cointegrating) relationship was found between real wages and productivity, but unemployment was apparently unconnected to the system, which lends support to the insider–outsider theory. A long‐term wage–productivity elasticity of 0,58 indicates that productivity has grown more rapidly than wages, which is consistent with the finding that labour's share of gross output has been shrinking over the past decade. These trends may be explained plausibly by the adoption of job‐shedding technology and capital intensification.     

Inflation in South Africa: An Assessment of Alternative Inflation Models

We consider the relative empirical performance of a range of inflation models for South Africa. Model coverage is of Phillips curve, New Keynesian Phillips curve, monetarist and structural models of inflation. Our core findings are that the single most robust covariate of inflation is unit labour cost. We further decompose unit labour cost into changes in the nominal wage and real labour productivity. The principal association is a strong positive relationship between inflation and nominal wages, while improvements in real labour productivity report only a relatively weak negative association with inflation. Supply‐side shocks also consistently report an association with inflation. As to demand‐side shocks, the output gap does not return a robust statistical association with inflation. Instead, it is growth in the money supply and government expenditure which return robust and theoretically consistent associations with inflationary pressure.     

Spinning the industrial revolution

The prevailing explanation for why the industrial revolution occurred first in Britain during the last quarter of the eighteenth century is Allen's ‘high wage economy’ view, which claims that the high cost of labour relative to capital and fuel incentivized innovation and the adoption of new techniques. This article presents new empirical evidence on hand spinning before the industrial revolution and demonstrates that there was no such ‘high wage economy’ in spinning, which was a leading sector of industrialization. We quantify the working lives of frequently ignored female and child spinners who were crucial to the British textile industry with evidence of productivity and wages from the late sixteenth to the early nineteenth century. Spinning emerges as a widespread, low‐productivity, low‐wage employment, in which wages did not rise substantially in advance of the introduction of the jenny and water frame. The motivation for mechanization must be sought elsewhere.     

Interindustry effects of productivity growth in Japan: 1960–2000

Combining conventional sectoral growth accounting and the static open input–output price model, we analyze the sources of growth of product prices in Japan during the period 1960–2000. Using the input–output framework, we take into account not only the effects of factor costs and productivity within a sector, but also their impacts outside of the sector. We find that Japan's deflation in the 1990s was characterized by low growth of wage rates, low productivity growth, and a low rate of return on capital. Until 1990, productivity improvements compensated for factor cost pressures on output price, especially the rapid growth of labor cost. In contrast, during the 1990s, decreasing rates of return on capital, not productivity improvements, canceled out the inflationary effect of wage growth. J. Japanese Int. Economies 19 (4) (2005) 568–585.     

Age,Wage and Productivity in Dutch Manufacturing

Previous empirical studies on the effect of age on productivity and wages find contradicting results. Some studies find that if workers grow older there is an increasing gap between productivity and wages, i.e. wages increase with age while productivity does not or does not increase at the same pace. However, other studies find no evidence of such an age related pay-productivity gap. We perform an analysis of the relationship between age, wage and productivity using a matched worker-firm panel dataset from Dutch manufacturing covering the period 2000–2005. We find little evidence of an age related pay-productivity gap.     

Training,Wages, and the Human Capital Model

Using recent data from the National Longitudinal Survey of Youth, this study examines the predictions of the human capital model concerning the relationship between training, starting wages, and wage growth. As implied by the model, training, particularly employer-financed training, is positively related to wage growth. Company-financed training also appears to be portable across jobs or to have a general component. In addition, there is some evidence that workers pay for initial training through a reduced starting wage. The results provide partial support for the human capital model.     

Wages,Productivity and Labour's Declining Income Share in Post‐Apartheid South Africa

The Marikana incident in 2012, as well as the protracted strikes by platinum miners, metal and postal workers in 2014 suggest that not all is well in the South African labour market. Even though those in employment are better off than the unemployed poor, macroeconomic data indicate that labour's share in gross value added has declined significantly during the first two decades following the first democratic election in 1994. A falling share of labour in income also means, by definition, that average labour productivity growth outstrips real wages growth. Data for South Africa suggest that productivity has indeed increased faster than wages in South Africa. This article argues that financialisation and more aggressive returns‐oriented investment strategies applied by for instance large investment institutions translated into higher required rates of return on capital, which in turn caused an increased implementation of capital‐augmenting labour‐saving technology that reduces labour's share in income.     

Role of Individual Social Capital in Wage Determination: Evidence from China

The present study examines the role of individual‐level social capital in workers’ wage determination in a Nash‐bargaining wage model using Chinese micro‐level data. The study finds a significant contribution of individual‐specific social capital to the wage level. In particular, larger individual social networks and workers’ positive attitudes toward social capital significantly increase the wage level. Moreover, the effect of social capital on the wage level is much larger for men than for women. The results indicate that construction of individual social capital could increase workers’ wages. However, efforts are needed to reduce the unequal contributions of social capital between men and women.     

Spatial spillovers of regional wages: Evidence from Chinese provinces

This study investigates the effects of spatial interactions on local wages based on a panel data from 31 Chinese provinces between 2001 and 2010. Using the Global Moran's I statistic, we provide empirical evidence for the presence of spatial dependencies in provincial wages. Then, we estimate the provincial wage equation using a spatial panel model that controls for spatial heterogeneity and spatial interdependence as well as other regional characteristics. The empirical results show that spatial wage spillover plays an important role in the determination of local wages. Furthermore, we find that human capital and economic growth are two underlying forces strengthening wage spillovers across provinces.     

Real Wages in Australia and Canada, 1870–1913: Globalization versus Productivity

Australia's and Canada's real wage experiences between 1870 and 1913 were distinctive. Faster productivity growth underpinned Canada's overtaking of Australia's wage levels. The globalization forces of migration and trade also shaped their comparative wages, principally by reducing wage growth in Canada. Immigration increased slightly Australia's real wages, but reduced wage levels in Canada, and tempered there the beneficial effects of rising productivity and improving terms of trade. In contrast, wage earners' share of national income rose after 1890 in Australia, with the productivity slowdown hitting chiefly rents and profits. Distributional shifts favouring wage earners in Australia, and the depressing effects of mass immigration on wages in Canada, limited Canada's wage lead before 1914, despite her faster productivity growth.     

Indonesia's Industrial Transformation 1 Part I

It is now possible to obtain a fairly complete picture of Indonesian industril development, based on the 1986 Economic Census and subsequent Updates, the mcorporation of the huge oil and gas sector, and die earlier industrial data base. The picture is one of dramatic growth and transformation since the late 1960s when Indonesia was one of the least industrialised countries for its size. In this paper we examine the pattern and changing structure of industry, focusing on industry composition, regional industrialisation, ownership, scale and wages. Indonesia's industrial transformation is evident not only in rapid Output and employment growth, but also in the transition to more capital and skill-intensive industries, a narrowing in the earlier very large (almost ‘dualistic’) productivity differentials, strong productivity and wage growth, a broadening of the industrial base outside Java, and a probable reduction in concentration levels (at least by establishment).     

Institutions, wages, and inequality: The case of Europe and its periphery (1500–1899)

This paper explores the long-run relationship between institutions and wage outcomes in Europe and its periphery. I find that cities that exercised stronger institutional protection of private property experienced: (i) higher levels of both skilled and unskilled real wages, as well as (ii) lower levels of inequality as measured by the skilled–unskilled wage ratio. While the first result corroborates existing work on the positive growth effects of better institutions, the second finding is more novel to the literature. Some explanations are proposed for how stronger institutions can cause an increase in the relative supply of skilled workers, thus lowering wage inequality.     

Internal Migration of Blacks in South Africa: An Application of the Roy Model

This study investigates the internal migration of black males in South Africa over the period after the formal end of Apartheid using the 1996 census data. The two issues of our primary interests are the following: (i) whether migration patterns of black individuals are consistent with the income‐maximising hypothesis as related to the destination choice; and (ii) whether the redistribution of human capital is detected in internal migration. The results from conditional logit regressions on choices among individuals in 318 districts show that individuals prefer districts with higher expected wages, conditional on other regional characteristics. In addition, there exist differing preferences on the share of population with post‐secondary education by individuals with commensurate educational attainments. Black individuals with post‐secondary education tend to migrate into areas with a higher share of population with post‐secondary education and vice versa, which confirms the divergence of human capital levels across districts.     

Engels’ pause: Technical change, capital accumulation, and inequality in the british industrial revolution

The paper reviews the macroeconomic data describing the British economy from 1760 to 1913 and shows that it passed through a two stage evolution of inequality. In the first half of the 19th century, the real wage stagnated while output per worker expanded. The profit rate doubled and the share of profits in national income expanded at the expense of labour and land. After the middle of the 19th century, real wages began to grow in line with productivity, and the profit rate and factor shares stabilized. An integrated model of growth and distribution is developed to explain these trends. The model includes an aggregate production function that explains the distribution of income, while a savings function in which savings depended on property income governs accumulation. Simulations with the model show that technical progress was the prime mover behind the industrial revolution. Capital accumulation was a necessary complement. The surge in inequality was intrinsic to the growth process: technical change increased the demand for capital and raised the profit rate and capital’s share. The rise in profits, in turn, sustained the industrial revolution by financing the necessary capital accumulation. After the middle of the 19th century, accumulation had caught up with the requirements of technology and wages rose in line with productivity.     

Do Exporting Firms Pay Higher Wages? Evidence from Kenya's Manufacturing Sector

Abstract: When trade liberalization was first embarked on in Kenya some 20 years ago, a key argument against it was that it would reduce domestic wages, as exporting firms sought to remain competitive versus, for example, the low‐cost Asian countries. A counter argument was that manufactured exports require more elaborate design, supervision, packaging and handling, and thus a more educated labor force than production for the domestic market. To attract such skills, exporting firms would need to pay higher wages than non‐exporting ones. This paper uses data from Kenyan manufacturing to study the impact of trade liberalization on earnings, distinguishing between exporting and non‐exporting firms. In particular, it investigates whether exporting firms paid a wage‐premium to their employees. The study uses manufacturing firm survey data from a World Bank regional project. The study has three important findings: (1) There was a large and significant effect of exporting on wages in the first decade of trade liberalization. During the first half of the 1990s, workers in exporting firms earned up to 30 percent more than those engaged in non‐exporting firms. The results are robust even after controlling for individual and firm‐level characteristics such as employee demographics, productivity, firm location and occupation. (2) After a decade of trade liberalization, exporting ceased to be a significant determinant of wages in Kenyan manufacturing, after controlling for productivity and firm location. (3) During the 2000s, casual or irregular employment became a more common feature of exporting firms. The results suggest that while higher wages were important in attracting skilled labor to exporting firms at the beginning of trade liberalization in the 1990s, domestic competition has since reduced the wage premium. Cost cutting pressures are instead reflected in the substitution of casual and low wage labor for permanent and better educated labor and in increased automation.     

Do Wages Continue Increasing at Older Ages? Evidence on the Wage Cushion in the Netherlands

In this study, we investigate the anatomy of older workers’ wages. The central question is whether the wage cushion—i.e., the difference between actual wages and collectively agreed-upon (maximum) contractual wages—contributes to the fact that wages continue increasing at older ages. We follow the wages of individual workers in twenty-two sectors of industry in the Netherlands using administrative data for the period 2006–2010. In the public sector, we find no evidence of a wage cushion. Wage scale ceilings set in collective agreements are guiding for older workers’ wages, and workers earning a contractual wage equal to a wage scale ceiling are not compensated with higher additional wages. In the private sector, we do find evidence of a wage cushion. Wage scale ceilings are less restrictive and workers earning a contractual wage exceeding the highest wage scale ceiling experience higher contractual wage growth. The private sector wage cushion enhances wage differentiation and allows for wages that continue increasing at older ages.     

Institutional wage-setting,labour demand and labour supply: Causal estimates from a South African pseudo-panel

Unemployment in South Africa has multiple causes. This article uses a district pseudo-panel to estimate the elasticity of labour demand, labour supply and unemployment with respect to wages. We assess whether hiring decisions are more sensitive to increases in wages of low-paid workers than high-paid workers, and whether wage growth prompts entry into the labour market. These channels combine to result in the positive causal effect of wage growth on unemployment. The research investigates whether these effects are dominated by districts in which unionisation rates are high and employment is concentrated in large firms. Wage growth of middle-paid to highly paid workers – as opposed to low-paid workers – reduces local labour demand and raises local unemployment. Bargaining arrangements correspond closely to the spatial wage distribution; in turn, a large part of the impact that wage growth has on labour market outcomes is determined by these wage-setting institutions.     

Evolution of Education Premiums in Cambodia: 1997–2007

This paper evaluates education premiums in Cambodia over the past decade using data from the 1997, 2003–2004 and 2007 Socio‐economic Surveys of Households. The Cambodian labor market has undergone a transformation over the past decade. In 1997, the earnings of workers employed for wages exhibited limited association with education and skills. The picture was dramatically different by 2003 and more so by 2007. The profitability of education had increased sharply, especially for women. There is evidence that the human capital model is now applicable to both men and women, resulting in a wider distribution of earnings. Instrumental variables estimates of the return to an additional year of schooling for male wage earners are found to be higher than the corresponding OLS estimates, but only in the private sector.     

Capital mobility and labor market volatility

We used a dynamic two-country optimizing model featuring efficiency wages to analyze the implications of capital mobility for labor market volatility. Capital mobility magnifies the short-run effects of productivity shocks and monetary shocks on employment and the real wage, but dampens the medium-run effects. The overall effects of capital mobility on the volatility and the cyclical properties of employment and the real wage are moderate.