Increase In Real Wages Research Articles

Abundance of the natural resources as a factor, which destimulates economic growth. Looking for the Dutch disease in Russia

In general thinking, countries possessing rich natural resource deposits are blessed, as resource abundance has seemingly positive correlation with the wealth and economic development of a nation. However, experience shows that countries endowed with extreme amounts of natural resources have found themselves in a serious misuse and on a damaging growth path. Extraordinary resource possession is rather an opportunity than a guarantee for better economic performance. The term “Dutch disease” refers to a situation in which new discoveries of natural resources or sharp rises in commodity prices lead to an increase in the equilibrium real exchange rate, thus undermining the competitiveness of the other tradable sectors in the economy. As suggested in the academic literature the Dutch disease is associated ith four main symptoms: a slowdown in manufacturing output, a booming non-tradable sector, an increase in real wages and real exchange rate appreciation. Russia’s oil price dependence and the risk of the Dutch disease are often considered as the main long-term challenges to sustainable growth in the country. In this regard, it is worth studying the available economic data for evidence of these phenomena. Russia’s oil price dependence and the risk of the Dutch disease are often considered as the main long-term challenges to sustainable growth in the country. In this regard, it is worth studying the available economic data for evidence of these phenomena. The main section examines whether in Russia: exports have become more biased towards oil and gas, GDP growth has become more sensitive to oil price fluctuations, the economy is showing symptoms of the Dutch disease.

The Poor Law of Old England: Institutional Innovation and Demographic Regimes

The striking improvement in life expectancy that took place in England between the Middle Ages and the seventeenth century cannot be explained either by an increase in real wages or by better climatic conditions. The decrease in the risk of utter destitution or of death from famine that was evident on the eve of the Industrial Revolution stemmed, in part, from institutional changes in the old poor law, which began to take shape and become effective early in the seventeenth century.

Fiscal stimulus and the role of wage rigidity

In this paper we study the impact of an expansion in public spending in an economy characterized by limited asset market participation and sticky wages. The flexible wage version of the model implies strong expansionary effects on output and consumption but also a counterfactual increase in real wages. The introduction of sticky wages, besides being a realistic addition, solves this problem and preserves the expansionary effects on output and consumption. Moreover, once we introduce segmentation in the labor market, sticky wages are even essential to obtain expansionary effects.

Macro-economic implications of the turning point

China's rapid growth in the reform era has been built around the availability of large amounts of migration from the countryside to the industrial cities, associated with only small increases in real wages. This pattern of growth has generated high savings, investment, rates of output growth, external payments imbalances, and high and growing inequality in the distribution of income. Slow and soon negative population and work force growth, rapid increase in modern sector demand for labor from an ever-higher base, and rapidly increasing investment in education per school-age person have absorbed most or all of the ‘surplus’ labor from the countryside, and rapid urban demand for labor is now associated with large increases in real wages in town and village. This paper explores analytically the effects of the exhaustion of underemployed labor in the countryside on these economic variables, and on the structure of trade and industry. It suggests some approaches to policy that can make this a favorable time for growth with equity in China.

The Poor Law of Old England: Resource Constraints and Demographic Regimes

England experienced a striking improvement in life expectancy between middle ages and the seventeenth century. This is not explained by an increase in real wages or better climatic conditions. We argue that it was partly a product of institutional change through the old poor law, which began to take shape and become effective early in the seventeenth century.

Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated US Tax Policy Shocks

We provide evidence on the dynamic effects of tax liability changes in the United States. We distinguish between surprise and anticipated tax changes. Preannounced but not yet implemented tax cuts give rise to contractions in output, investment, and hours worked while real wages increase. There are no significant anticipation effects on aggregate consumption. Implemented tax cuts, regardless of their timing, have expansionary effects, on output, consumption, investment, hours worked, and real wages. Results are shown to be robust. Tax shocks are important impulses to the US business cycle and anticipation effects have been important during several business cycle episodes. (JEL E23, E32, E62, H20, H30)

The effect of inflation and real wages on productivity: new evidence from a panel of G7 countries

This article examines the effect of inflation and real wages on productivity within a panel unit root and panel cointegration framework for the G7 countries over the period 1960 to 2004. The main contribution of the article is to provide panel long-run estimates of the effect of inflation and real wages on productivity in the G7 countries over this period. The article finds that for the panel as a whole a 1% increase in real wages generates a 0.6% increase in productivity, while the effects of inflation on productivity are statistically insignificant for most of the individual countries and for the panel as a whole.

Can a minimum wage increase have an adverse impact on inequality? Evidence from two Latin American economies

This paper uses a semiparametric model to analyze the impact of an increase in the real minimum wage on inequality in Colombia between 1995 and 1999 and in Paraguay between 1993 and 2000–2001. Simulations suggest that if the employment effects of the minimum wage increase are ignored, the underlying policies would contribute to reduce earnings inequality in Colombia and would be inequality neutral in Paraguay. By considering the drop in wages of those who lost their jobs, simulations suggest that in both countries the policy in question would increase earnings inequality under some assumptions about the employment elasticity of the minimum wage and the new level of earnings unemployed workers rely upon. While these findings do not mean that minimum wage increases in LDCs (Less Developed Countries) necessarily have adverse distributional affects, they suggest that minimum wage policy should be implemented with care depending on how sensitive employment is to wage increases.

The growth of government spending and the money supply

PurposeUsing quarterly data for a sample of 17 industrial countries, the purpose of this paper is to study asymmetry in the face of monetary shocks compared to government spending shocks.Design/methodology/approachThe paper outlines demand and supply channels determining the asymmetric effects of monetary and fiscal policies. The time‐series model is presented and an analysis of the difference in the asymmetric effects of monetary and fiscal shocks within countries is presented. There then follows an investigation of the relevance of demand and supply conditions to the asymmetric effects of monetary and fiscal shocks. The implications of asymmetry are contrasted across countries.FindingsFluctuations in real output growth, price inflation, wage inflation, and real wage growth vary with respect to anticipated and unanticipated shifts to the money supply, government spending, and the energy price. The asymmetric flexibility of prices appears a major factor in differentiating the expansionary and contractionary effects of fiscal and monetary shocks. Higher price inflation, relative to deflation, exacerbates output contraction, relative to expansion, in the face of monetary shocks. In contrast, larger price deflation, relative to inflation, moderates output contraction, relative to expansion in the face of government spending shocks. The growth of output and the real wage decreases, on average, in the face of monetary variability in many countries. Moreover, the growth of real output and the real wage increases, on average, in the face of government spending variability in many countries. Asymmetry differentiates the effects of monetary and government spending shocks within and across countries. The degree and direction of asymmetry provide a new dimension to differentiate between monetary and fiscal tools in the design of stabilization policies.Originality/valueThe paper's evidence sheds light on the validity of theoretical models explaining asymmetry in the effects of demand‐side stabilization policies. Moreover, the evidence should alert policy makers to the need to relax structural and institutional constraints to maximize the benefits of stabilization policies and minimize the adverse effects on economic variables.

Algeria: 2005 Article IV Consultation: Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Algeria

This 2005 Article IV Consultation highlights that the Algerian economy continues to benefit from abundant and increasing hydrocarbon revenues. Real GDP growth is expected to continue at about 5 percent in 2005, led by increased output in the hydrocarbon sector and sustained activity in the construction and services sectors. Executive Directors have welcomed the authorities’ resolve to maintain fiscal sustainability over the medium term. They have stressed the importance of preparing comprehensive medium-term budget projections, and limiting increases in real wages to increases in productivity in the nonhydrocarbon sector.

What Does a Technology Shock Do? A VAR Analysis with Model-Based Sign Restrictions

This Paper estimates the effects of technology shocks in VAR models of the United States, Japan and Germany, identified imposing restrictions on the sign of impulse responses. These restrictions are motivated with priors on the parameters of a class of DSGE models with both real and nominal frictions. Estimated technology shocks lead to substantial and persistent increases in labor productivity, real wages, consumption, investment and output. In contrast with most results in the VAR literature, hours worked are much more likely to increase, displaying a hump-shaped pattern. These results are shown to stem primarily from the identification strategy proposed in the Paper, which substitutes theoretical restrictions for the atheoretical assumptions on the time series properties of the data, that are the hallmark of long-run restrictions.

Poverty and Children's Work in 19th and 20th Century Spain and Nowadays Developing Countries. First Results

In the first part of this paper we portray the relationship between mothers earnings, fertility and children's work in the Spanish (Catalan) context of the second half of the 19th century and the first third of the 20th century. Specific human capital investment in adult working women had as an outcome the sharp increase of their real wage and also the increase of the opportunity cost of time devoted to house work including child rearing. Fertility evolution is endogenous to the model and decreases as a result of women real wage increases. Human capital investment of labouring women and mandatory schooling of children shift the labour supply function to a new steady state in which the slope of the function is steeper. According to recent papers this model applies to 20th century Spain and it causes the abolition of children's work. Nonetheless this model do not apply to nowadays developing world. The increasing spread of the informal sector of the economy and economic inequality imply the increasing use of part time women's and children work. High income inequality and poverty, in promoting the intensive use of the mother's and children's work, are contemporaneously blocking the development of human capital, both health and education. In these countries children's work is an obstacle to human capital accumulation does not allow for overcoming the poverty trap.

Zusammenhang von Löhnen, Preisen und Beschäftigung in Deutschland von 1975 bis 2002

Fur 1975 bis 2002 wird mit Hilfe okonometrischer Methoden der Einfluss von Lohnen auf Preise und Beschaftigung in Deutschland untersucht. Die wichtigsten Ergebnisse sind: Ein Anstieg des realen BIP um 1 % fuhrt zu 0,8 % mehr Beschaftigung, sofern die realen Lohne unverandert bleiben; ein Anstieg der realen Lohne um 1 % hat fur sich genommen dagegen einen Ruckgang der Beschaftigung um 0,8 % zur Folge. Wirtschaftswachstum hat also nach wie vor positive Beschaftigungswirkungen, doch wurden sie in der Vergangenheit durch die Lohnpolitik zunichte gemacht. Zwischen Preisen und Lohnen wurden zirkulare Beziehungen identifiziert, wobei die treibende Kraft die Lohne sind. Die so genannte Phillips-Kurve ist eine statistische Illusion, die sich aus der Kombination von konjunkturzyklischen Bewegungen und Trends bei Arbeitslosigkeit und Inflation ergibt.

Is It Time For A Government-Run Health Care System?

Over the past forty years, national health policy has moved through successive eras that have differed markedly in reform initiatives. The 1960s and 1970s saw government policies that focused on hospital and physician supply and a regulatory national health planning system; the 1980s brought a national system of Medicare hospital and physician payment regulations; and the 1990s brought an emphasis on managed care and markets. Critical Condition, by Donald Barlett and James Steele, Pulitzer Prize–winning investigative reporters, makes a strong case that much is wrong with our health system, despite (and, in part, because of) “Washington’s blind obsession with market-based health care.” For the most part, their recounting of failures will be familiar to the health policy community: the world’s highest health care spending but often poor health outcomes (for example, in longevity and infant mortality); more than forty-four million uninsured people; loss of insurance coverage with job loss; communities having to organize bake sales to help pay a child’s medical bills; egregious hospital overcharging and bill collection practices; overpriced prescription drugs (protected by government import restrictions); large-scale fraud by drug companies; emergency department closings and ambulance diversions; drive-through deliveries; medical errors as a leading cause of death; the revolving door of Washington health policy influentials departing for lucrative lobbying jobs; and health-sector spending of $734 million in 1997–2000 to lobby Congress and the executive branch. From this general indictment, Barlett and Steele move on to deal with the role of Wall Street and investors (HealthSouth, HMOs, Columbia/HCA, Tenet, physician practice management companies), MedPartners’ failure, new business bureaucracies (with their voice mail and call centers—some outsourced to India), and the Madison Avenue influence (direct-to-consumer advertising, fen-phen, and other drugs). The authors are particularly good at combining descriptions of national problems with personal case studies that show how innocent people are victimized. However, their indictments of governmental pro-business policies could even be stronger. For example, they could have added a chapter on the 1997 Medicare+Choice initiative, which saw more than two million elderly people dumped by their Medicare HMOs, and another chapter on the unsuccessful fight to give patients a right to sue managed care companies. The recent Medicare prescription drug legislation will offer more opportunity for investigative journalists. Although Critical Condition works well to make the authors’ points, it is not a full assessment of the benefits and costs of health care markets. For example, the move to managed care and market-negotiated hospital and physician payments (from traditional open-ended B o o k R e v i e w s

Petroleum and Democracy in Venezuela

Why has Venezuelan society not followed the same pattern as the rest of the Latin American countries? While the rest of the countries had military governments and economic crises, Venezuela had a stable democracy and economic prosperity. But now the situation has been reversed. Between 1926 and 1980 oil profits permitted a sustained, broad social and economic improvement, with increases in real wages for workers and increasing profits for businesses, all of which strengthened democracy. Starting in 1980, the situation changed and produced a collapse of the oil model, the ramifications of which are shown by the economic crisis of 1983, the popular revolt of 1989, and the coups d'etat of 1992, resulting in the election of presidents Caldera and Chavez. The traditional political parties lost power and new social actors appeared: the radical left, the unorganized civil society, the political right, and the military that controlled the state apparatus. This paper explains these changes by arguing that the oil profits have played a role in the formation of society: creation of social classes by the government, economic autonomy of the state, dependence on imported products, exaggerated growth of public employment, state domination in all areas of the economy, and the overall subsidizing of society. The Chavez government continues to adhere to the same profit-oriented, static, populist model that has made Venezuela more dependent on oil and less sustainable. Thus, the oil revenue that made democracy possible can also be seen as the basis for the installation of an authoritarian and military government in Venezuela.

The Effects of Macroeconomic Policy Shocks on the UK Labour Market

This paper discusses the dynamic response of employment, average hours and real wages to monetary, government spending and net taxes shocks in the UK for the 1970 Q1-2003 Q1 period. The response of labour market variables to a monetary policy shock are in line with economic theory and previous empirical evidence. The adjustment of labour input is primarily along the extensive margin. However, there is also significant adjustment along the intensive margin one year after the shock. Over the more recent period this result is overturned with bigger and faster response in average hours two quarters after the shock. We interpret this result as being suggestive of labour market reforms during the 1980s having reduced the labour adjustment costs. A government spending shock leads to negative employment, hours and output responses, while real wages increase. It is attributed to the government consumption part of spending, and in particular its wage bill component. The effect of a net tax shock generates transitory negative effects on employment and hours, that become positive raising output after the second quarter. The output effects of both spending and tax shocks are in line with previous UK evidence.

Minimum wages and employment in Swedish hotels and restaurants

This paper considers the effects of union-bargained minimum wages on transitions into and out of employment in the hotels and catering industry over the period 1979–99. This industry is characterised by a high fraction of unskilled labour input, high worker turnover and binding minimum wages. The empirical approach identifies workers affected by real minimum wage increases and decreases, respectively. Job separations and accessions for the treatment groups are then contrasted to the outcomes for control groups, with wages marginally above those of the treatment groups. Unlike previous studies, this paper also considers same-period transitions for same-wage workers who are unaffected by minimum wage changes. This procedure should help to control for unobserved differences between high- and low-wage workers and is made possible by the diversified minimum wage structure of the industry. According to the results, job separations tend to increase with rising minimum wages (except for teenagers during 1993–98). The evidence regarding accessions is less conclusive.

The Linkage between Prices, Wages, and Labor Productivity: A Panel Study of Manufacturing Industries

This article investigates the long‐run relationship between prices and wage‐adjusted productivity as well as between real wages and average labor productivity at the industry level for a panel of 459 U.S. manufacturing industries over the period 1956‐1996. Panel reintegration test results strongly reject the null of no reintegration in the panel between both prices and wage‐adjusted productivity and between labor productivity and real wages for many (but not all) industries. Granger‐causality tests show that prices are weakly exogenous and cause movements in unit labor cost. Bidirectional Granger causality is found between real wages and productivity; however, a one‐to‐one relationship is strongly rejected between real wages and productivity. Increases in labor productivity are associated with a less than unity increase in real wages.

Demographic Changes and Economic Activityin Greece

This paper investigates the linkages among demographic changes (fertility choice, marriage decision and mortality), real wages and real output in Greece over the period 1960–1998. The results show that in the long run a decrease in infant mortality rates, taking into consideration economic performance and the labor market, causes a reduction in fertility rates. In addition, the results suggest that an increase in real wages decreases nuptiality and fertility. Employing vector error-correction models and impulse response functions, the empirical results support the endogeneity of fertility choice to infant mortality, the labor market and the growth process.

Jobs or jails? The crime drop in Texas

Crime went down throughout the U.S. in the 1990s. Potential explanations include demographic shifts, improved economic opportunities, changes in drug markets, evolving police strategies, and an increasing prison population. Previous attempts to parcel out responsibility among these explanations are unpersuasive. Some do not consider all of the explanations, others rely on highly aggregated data, still others confuse cause and effect. An analysis of Texas counties that deals with these problems shows that the Texas crime drop was largely due to increases in the jail and prison population; property crime also dropped due to increases in real wages and wealth and in public order arrests. Further prison construction would not be cost-effective in Texas due to declining marginal returns, but direct interventions to improve economic opportunities or make police work more proactive may be. © 2005 by the Association for Public Policy Analysis and Management.