Money Wage Rates Research Articles

Dimensions of crisis after the famine of 1866 in colonial Orissa: A study of economic crisis

The Bengal-Orissa Famine visited Orissa in 1866. It was most horrible famine because one-third of the population was perished in this famine. In addition, it generated many fundamental changes in the economic and social behavior of the people. The immediate result of the famine was that the area under cultivation was diminished for want of cultivators and laborers. Similarly, after the famine of 1866, money wage rate was increased. The famine had also devastating effect on the cottage industries because the area under cotton cultivation diminished for want of raw materials. The agriculture of Orissa was also affected because of scanty rainfall and subsequent apathy. Irrigation system introduced in Orissa was with a colonial profit motive. Similarly, several canals were introduced in Orissa for communication purposes. The article seeks to discuss the dismal economic picture in Orissa after the famine of 1866. It further want to delineate the failure imperial agenda after the coming of railway. The economy of Orissa presented an ominous picture after the famine of 1866.

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History vs. equilibrium one more time: how Keynes’s General Theory foundered on the rocks of comparative statics

Keynes’s message, that full employment was an unlikely outcome for a capitalist economy, did not survive scrutiny in a comparative-statics framework. But this was the fault of the framework, not the message. The main criticisms leveled at the idea of an underemployment equilibrium were that, as the money wage rate fell, the Keynes effect would lead to an expansion of investment demand (Modigliani) and that the real-balance effect would lead to an expansion of consumption demand (Haberler and Pigou). Neither of these criticisms survives when real-time changes in the money wage replace static comparisons of equilibria with different money wages. The lesson is that dynamic adjustment is key to understanding the workings of a capitalist economy.

Recent Developments in Macro-Econometric Modeling: Theory and Applications

Developments in macro-econometrics have been evolving since the aftermath of the Second World War.[...]

The Phillips Curve Revisited: Implications of an Inaccurate Urban Legend

In his article, The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957, Phillips demonstrates a clear trade-off relationship between the rate of change in nominal wages and the rate of change in unemployment for the period under study. Post-publication, Phillips’ article became popular and is widely discussed in first-year economics textbooks. This article analyses the educational implications of the Phillips curve in textbooks prescribed by South African universities. It has been found that in a number of these publications, the Phillips curve is incorrectly illustrated as a trade-off between the level of inflation and the level of unemployment, which is not what the author concluded. A change in the way the Phillips curve is taught at tertiary institutions is therefore required to ensure that students are properly informed about aspects impacting employment. The findings of Phillips in their original format, rather than as misrepresented in some South African textbooks, should be taught to South African students. The research also shows that educators should consult original sources, rather than relying on the interpretation of others, when teaching technical aspects of an academic discipline.

J M Keynesss 1937 Refutation of the Claim That HickssHansen (and Others) Saved Keynesss General Theory by the Development of the IS-LM Model in His Professor Pigou on Money Wage Rates in Relation to Unemploymentt

The myth or story regarding the creation of the IS-LM model in the economics profession goes something like this. Keynes correctly showed in the General Theory that you could not specify the rate of interest just from the supply of savings and demand for investment schedules alone because this only provided an IS curve. However, Keynes erred in claiming that it was the demand and supply of money that determined the rate of interest. This meant that Keynes was arguing that the LM curve alone determined the rate of interest. Thus, Hicks, Harrod, Meade, Champernowne, Reddaway, etc., saved Keynes from error by combining the IS and LM curves together to provide a consistent and coherent theory of the rate of interest. A more sophisticated version of this myth is that, while Keynes himself did derive and specify the IS-LM model in his student lectures in December, 1933, and included them in the 1934 draft copy of the General Theory, he refused to present this formal model in the General Theory because he was a follower of Marshall’s dictum that required a writer to burn the mathematics after he had used it to confirm the accuracy of the literary analysis. Various additional claims in this version of the myth were that Keynes was an anti-formalist or had an anti-mathematical or anti-quantificationist streak in him that resulted in his not presenting any formal model of his theory in the General Theory. Both of these stories were destroyed by Keynes himself in the draft copy of his 1937 paper, titled “Professor Pigou on money wage rates in relation to unemployment.” The perpetuation of this myth for over 80 years, combined with the perpetuation of the myth of Adam Smith’s Invisible Hand, exposed repeatedly by G. Kennedy, could lead citizens to question whether economics is even a weak or inexact science. Science and myths can never coexist together if a field of study is truly scientific. Keynes originated, created developed, applied and taught the IS-LP(LM) model starting in December, 1933. Sections IV of both chapters 15 and 21 contained Keynes’s theory and applications, as well as astute criticisms of his own theoretical work. The myth that there was no IS-LM model in the GT is an anti- scientific claim that directly conflicts with the scientific claims made by the economics profession. The sooner this myth is put to rest, the better it will be in the long run for all economists.

Revisiting the Phillips Curve: A Visualization from a Multidimensional Graphical Perspective

This article explores the possibility of visualizing the Phillips curve from a multidimensional perspective. We are using a new multidimensional coordinate space that is entitled Mega-Dynamic Disks Multivariable Random Coordinate Space in Vertical position. The mega-dynamic disks multivariable random coordinate space in vertical position facilitates the graphical visualization behavior of the Phillips curve from a multidimensional graphical point of view. However, we take as main bibliographical reference the original and remarkable paper that was published in Economica by A.W. Phillips in the year 1958. This paper is entitled Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957. Additionally, the same paper is going to be our main database source to build the original Phillip curve into a multidimensional graphical form. In essence, our paper extends the significance of Phillips curve beyond mere theory, but as practical instruments applicable to solving economic problems.

Measuring the price of labour in agricultural economies: the shadow wage rate

Labour market imperfections are one of the leading causes of economic backwardness that result in under utilization of labour, the most important input in production process. Labour markets are shallow in subsistence agricultural economies which causes problem in determining the wage rate. The household production function provides an alternative to estimating the shadow wage rate such that it reflects the opportunity cost of labour. The most important deductions of the household production function are: the marginal productivity of labour is its shadow wage rate and; at equilibrium, the marginal returns from labour are exactly equal across all activities. This paper uses data collected in 2008 in course of a leasehold forestry study from 297 households from Makwanpur district of Nepal using a multi stage sampling. This paper estimates the marginal productivity of labour in maize production, the most common form of economic activity, for male and female labour. It examines how the money wage rate and the actual wage rate may differ from the shadow wage rate reflected by marginal productivity of labour in agriculture. The findings reveal that the actual wage rate for male labour is inflated and exceeds its marginal productivity while female wage rate slightly understates its marginal productivity. The paper concludes with policy recommendation of ensuring institutional mechanisms to correct for these imperfections. DOI: http://dx.doi.org/10.3126/ejdi.v15i1-2.11860 Economic Journal of Development Issues Vol. 15 & 16 No. 1-2, pp. 24-35

The Visualization of the Phillips Curve from a Multidimensional Graphical Perspective

This article explores how to visualize the Phillips curve from a multidimensional graphical perspective. We are using two new multidimensional coordinate spaces that are called “The Mega-Dynamic Disks Coordinate Space in Vertical position or Horizontal Position.“ mega-dynamic disks coordinate space in vertical position or horizontal position and facilitate the visualization of the Phillips curve behavior from a multidimensional graphical view. This paper is taking as a main reference the original paper that was published by A.W. Phillips in the year 1958. This paper is entitled The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957. This remarkable paper is going to be our basic bibliographical reference to build the original Phillip curve into a multidimensional graphical form. In essence, the paper extends the significance of the Phillips curve beyond mere theory, to a practical instrument applicable to solving economic problems.

Alfred Marshall and the Quantity Theory of Money

Marshall made at least four contributions to the classical quantity theory. He endowed it with his Cambridge cash-balance money-supply-and-demand framework to explain how the nominal money supply relative to real money demand determines the price level. He combined it with the assumption of purchasing power parity to explain (i) the international distribution of world money under metallic standards and fixed exchange rates, and (ii) exchange rate determination under floating rates and inconvertible paper currencies. He paired it with the idea of money wage and/or interest rate stickiness in the face of price level changes to explain how money-stock fluctuations produce corresponding business-cycle oscillations in output and employment. He applied it to alternative policy regimes and monetary standards to determine their respective capabilities of delivering price-level and macroeconomic stability. In his hands the theory proved to be a powerful and flexible analytical tool.

The Struggle Over the Real Wage in the Monetary Production Economy

Keynes contents in General Theory that the monetary market logic of the aggregate real wage in the monetary production economy conveys: (i) the determination of the average real wage rate, the level of employment, and the possibility of involuntary unemployment through the interaction of the monetary markets and the goods markets; and (ii) the determination of the money wage rate through the bargains of the firms and the workers as a market-theoretical stability condition of the economic system. Accordingly, (iii) the money wage claims of labour (in conformity with changes of the average labour productivity) do not alter the distribution of income between capital and labour; and (iv) the struggle about the money wages by different groups of workers is actually a zerosum game over the distribution of the aggregate real wage between the different fractions of the working class. The paper discusses Keynes´s contention in the context of the monetary-keynesian theory of the endogenous-money monetary production economy.

The long-run determinants of UK wages, 1860–2004

As it is almost 50 years since the Phillips curve, we analyze an historical series on UK wages and their determinants [see Phillips, A.W.H., 1958. The relation between unemployment and the rate of change of money wage rates in the United Kingdom, 1861–1957. Economica, 25, 283–299]. Huge changes have occurred over this long-run, so congruence is hard to establish: real wages have risen more than 6 fold, and nominal 500 times; laws, technology, wealth distribution, and social structure are unrecognizably different from 1860. We investigate: wage rates and weekly earnings; real versus nominal wages; breaks over 1860–2004; non-linearities, including Phillips’ non-linear response to unemployment; ‘trade union power’ and unemployment benefits; and measures of excess demand, where workers react more to inflation when it rises.

Neoclassical labour market dynamics, chaos and the real wage Phillips curve

The relationship between wage inflation and unemployment has been extensively investigated since the early work of Phillips [Phillips, A.W., 1958. The relation between unemployment and the rate of change of money wage rates in the U.K. 1861–1957. Economica 25, 283–299] and Lipsey [Lipsey, R.G., 1960. The relation between unemployment and the rate of change of money wage rates in the U.K. 1861–1957: a further analysis. Economica 27, 1–31], and it is still a matter of debate. In this paper we study the dynamics of a standard neoclassical labour market under the simplest Walrasian adjustment rule. We show that when consumption and leisure are sufficiently low substitutes, the unique Walrasian equilibrium of the economy can be destabilised, and regular or even chaotic fluctuations of wages and employment appear. This leads to an interesting resurrection of a real wage Phillips curve as a long-term phenomenon.

Using Micro Data to Test the Divergence between Prices and Labour Values

An extremely robust finding in Marxian empirical economics is the 'Shaikh result' that estimates of labour values are closely correlated with prices. This result is established using input-output data together with a standard procedure in which variations in money wages are assumed to reflect labour quality. Two problems with this standard procedure can be identified. First, there is no translation between money units of wages and labour value units of output produced by different types of heterogeneous labour. Second, the standard procedure assumes perfectly competitive labour markets. In this paper, a new micro procedure for estimating labour values is developed in which both of these problems are addressed. To translate between money wage rates and the labour value of outputs a practical starting point for empirical analysis is suggested using some of the readily available tools of neoclassical economics. The assumption of perfect competition is accordingly relaxed by estimating a microeconometric wage equation using data from the UK Family Expenditure Survey. Conjoining this micro data with input-output data, estimates of labour values are used to test the Shaikh result, which is found not to hold in this particular exercise; with labour values diverging substantially from money prices.

On the controllability of nonlinear economic systems with delay: The Italian example

The dynamic model of some key economic indicators – the gross national product, GNP, interest rate, R, employment, L, value of capital stock, k, prices, p, and cumulative balance of payment, E – are derived here from mathematical and economic principles. The model is described by a hereditary ordinary differential equation, a nonlinear delay differential pursuit game of neutral type. The quarry control-solidarity or government intervention consists of money supply, M, government budget, net expenditure, taxation, T, exchange rate, e, tariffs, foreign credit fo, distance between trading partners or trading arrangements d, or preferential arrangement. The pursuer control (private initiative) consists of autonomous private consumption, investment, net export, labor productivity, money wage rate w, autonomous money demand m, income autonomous consumption y 10. Conditions are established for the variables of the economic indicators to be controllable from one initial function to a terminal function, in particular, employment, national income and prices can be controlled from one arbitrary vector function to another when the controls of the system are subject to scarcity, i.e., to constraints. Conditions for controllability are presented. Our model is tested with data on Italian economy. This paper opens up the hope that full employment, high income growth is compatible with low prices and low inflation, provided the control matrix has full rank, i.e., the existing controls are fully effectively used.

WAGE FLEXIBILITY AND THE STABILITY ARGUMENTS OF THE NEOCLASSICAL SYNTHESIS

ABSTRACTThis note fills a lacuna in the neoclassical synthesis and completes its dynamic disequilibrium processes by including adjustments of the money wage rate in response to excess demand on the labour market. A Walrasian and a Keynesian variant are distinguished. While in the first case local asymptotic stability is always ensured, the equilibrium is unstable in the Keynesian case if money wages are too flexible relative to the adjustment speeds on the product and money markets.

Liberalized Exchange Rate Management System and Devaluation in India: Trade Balance Effect

This paper examines the short run trade balance effects of the recent exchange rate policies in India in terms of the extended Jones-Corden [1976] model. With rigidity of money wage rate as the target of concurrent fiscal policy, a change in the LERMS formula improves trade balance only if non-trade-ables are relatively labour-intensive. A devaluation might still fail to improve trade balance, on the other hand, in presence of imported input. The Jones-Corden condition thus gets modified in presence of imported input.

An Open Economy Model of Wages and Employment with an Application to Korea

Money wages have two aspects: increase in the money wage rate raises money costs, and money incomes and aggregate demand as well. The Classical analysis assumes that the money wage rate affects nothing but factor costs, with aggregate demand constant. It follows that employment varies inversely with wages. Keynes (1936, pp. 257-260) declares this proposition an ignoratio elenchi, and insists that changes in money wages must be analyzed through their effects on the components of aggregate demand. In a closed economy, therefore, most economists argue that the net effect of the rise in the money wage rate is generally to reduce employment via the Keynes effect.' The negative relationship between wages and employment is often inferred from Neoclassical two-sector models such as Hicks (1937) and Meade (1937),2 or from Post Keynesian models such as Weintraub (1978, 1981), Kregel (1988), and Darity (1989).3 The relationship between changes in money wages and employment in open economy is a different question where a distinction can be made between export and domestic sectors. The Classical presumption regarding wage changes on employment in the export sector may be relevant if the demand for exports is determined almost independently

The Keynesian Theory of the Price Level: An Econometric Evaluation Using a Vector Autoregression Model

Wallace C. Peterson has often remarked that John Maynard Keynes' of price level, as presented in chapter 21 of General Theory, is one of most neglected areas of Keynes' work. Instead, an almost universally accepted principle in macroeconomics is relati onship between money and prices that is denoted by equation of exchange as interpreted by monetarists. In fact, economists, who can often be expected to be a skeptical lot, seem to embrace this relationship almost without question. We see this essentially monetarist approach developed in all of major principles of economics texts and in many of intermediate macro texts as theory of price According to Keynesian theory, various microeconomic factors including wage bargain, bottlenecks, and law of diminishing returns determine price level. As such, price level is a variable that is determined almost as a residual effect of other processes in economy. Along these same lines, late Joan Robinson remarked that the price level in an industrial economy is a historical accident. The main influence upon prices, at any moment, is level of money wage rates, and level of money wage rates, at any moment, is result of movements that have taken place over distant or recent past' (1973, p.90). In this paper I will briefly present Keynesian of price level. Then I will employ a vector autoregression (VAR) model to test several hypotheses concering Keynesian and monetarist theories. I will also use VAR model to explore dynamics of Keynesian

The Investment Function: Five Propositions in Response to Professor Gordon

IThe literature of dissent from the neoclassical traditions in our subject has reached significant proportions. Coming from the varied pens of Nobel laureates and the rank and file, not all of the dissent can be dismissed as what Hutchison has called opaque verbiage (1978, p. 212). Some of it no doubt is. Moreover, the neoclassical theory itself is seen as something other than monolithic. It means different things to different critics, as differing aspects of it attract analytical opprobrium. A calm reflection on the debate raises several perspectives from which the analytical significance and the empirical relevance of the earlier economic theory can be assessed. Among them is the question of which variables or identifiable forces can profitably be understood for analytical purposes as endogenous, and which may be regarded as exogenous. That exogeneity-endogeneity debate is directly relevant to the question of investment activity and its significance for the functioning of the economic system. The issue is in no sense a new one. Certain styles of economic theorizing argue, for example, that progress is to be made most effectively by regarding the money wage as exogenous rather than holding to its neoclassical endogeneity. Similarly, the money supply, and particularly changes in the money supply, are best understood, it is claimed, to be endogenous rather than exogenous. The rate of interest, given the Central Bank's policy influence, is thought to be exogenous rather than endogenous. In each case, in relation to the money wage rate, the money supply, and the rate of interest, advances in theorizing have turned the