Real Wage Rate Research Articles

Push and (or) Pull? Drivers of Labour Force Participation in Indian Agriculture

Labour force participation rate in the Indian agricultural sector is gradually declining. This paper wants to investigate the possible causes behind it. Here both possible push and pool factors behind this decline are considered simultaneously. Initially, on the basis of 70th round NSSO data on agricultural households, it is tested whether or not marginal farmers are enjoying comparative advantage during the time of getting employment in the agricultural sector as agricultural labourer. But as ‘decline’ is a flow concept, to investigate possible reasons behind this decline, we have considered six rounds state-level NSSO data on Employment Unemployment Survey of India and its 20 major states. Applying fixed effect panel data regression technique after considering state-specific possible factors, it is found that gradual decline of per capita land holdings is the major push factor responsible for gradual decline of labour force participation rate in Indian agriculture. Apart from that, other push factors like hike of real agricultural wage rate, improvement in education level of the agricultural households and pull factor like hike of non-farm real wage, employment opportunities in construction and other non-farm activities are found significant for gradual decline of labour force participation rate in Indian agriculture.

Incarceration and Labor Market Conditions of the Underclass in the United States: An Empirical Investigation

In this paper using both annual time-series data at the federal level as well as annual state-level (balanced) panel data from 1980 to 2017 we investigate the relationship between several labor market variables and the federal and state level incarceration rates in the United States. We find a significant empirical association between the incarceration rate, 10th-percentile real-wage rate, and the unemployment rate, as well as the level of inequality. Specifically, the time-series analysis reveals a significant negative correlation between the incarceration rate and the 10th-percentile wage rate. Moreover, in all time-series regressions, the unemployment rate and the 40%-to-10% wage ratios are both positively correlated with the incarceration rate. In the state-level analysis, panel data regressions indicate that the unemployment rate, income inequality, and unemployment duration are positively associated with incarceration whereas the 10th-percentile wage is negatively correlated with the latter.

Differences in wage-determination systems between regular and non-regular employment in a Kaleckian model*

In this study, we build a Kaleckian model incorporating institutional differences between the wage determination of regular employment and that of non-regular employment. In our model, three types of wage-bargaining regimes are defined based on how regular workers’ collective wage bargaining affects the real wage rate of non-regular workers. We investigate the stability conditions of the dynamical system under each combination of demand regimes and wage-bargaining regimes. We also conduct comparative static analysis and show that the effects of changes in the parameters are diverse depending on combinations of demand regimes and wage-bargaining regimes.

Sraffian general equilibrium

AbstractIf the Sraffa system of equations is augmented by consumption demand equations of households and investment demand equations of industries the result is a complete system of general equilibrium having a unique positive solution for the relative prices, absolute levels of industrial outputs, the rates of growth and profit, the real wage rate, and the shares of ownership of the capital stock. The model has been generalized to include the government sector and determine the tax rate and public expenditure. Constructive algorithms for the computation of the general equilibrium have been presented. Empirical evidence from cross‐country sources has been gathered in support of a central inference of the model viz. the long‐run convergence of industrial growth rates and rates of profit towards uniformity.

The end of the flat tax experiment in Slovakia: An evaluation using behavioural microsimulation in a dynamic macroeconomic framework

The paper introduces a new way of linking microsimulation models with dynamic general equilibrium frameworks to obtain an evaluation of the impact of detailed tax and benefit measures on the aggregate economy. In the approach presented in this paper, income heterogeneity interacts with the macro-economy via aggregated individual labour supply decisions which influence, and are influenced by, the dynamic evolution of the real wage rate. The method involves a reduced-form representation of the information flow between the macroeconomic and microeconomic blocks. The practical usefulness of the approach is demonstrated by evaluating actual and hypothetical tax reforms that involve abandoning the flat tax system in Slovakia. A hypothetical move to a highly progressive tax structure is shown to generate some employment gains but is associated with a drop in aggregate income and tax revenue.

The Legacy of Ashok Mitra

Ashok Mitra, the renowned Indian economist, passed away on 1 May 2018. Mitra was a keen analyst of the relationship between economics and politics, which he understood as being inextricably enmeshed, with the latter having a degree of relative autonomy. It followed, for Mitra, that class struggle ‘in society at large’ underlay ‘every aspect’ of economic life, including the determination of economic variables. He focused his analytical sights on distributional dynamics, specifically on the relative shares of the different classes in national income and the role of the State. He took issue with, and went beyond, Kalecki’s theory of ‘degree of monopoly’, which Mitra did not take as a given but as determined by factors that included the real wage rate. He also advanced, beyond the main approaches, to the issue of the terms of trade, including that of Prebisch, by illuminating the class differentiation within the sectors, especially agriculture, and the political clout of the rural rich. Mitra was also passionate for economic decentralization, at a time when the Third World was in a special, early post-war and post-colonial conjuncture, which bestowed a higher degree of manoeuver for state intervention and policymaking. Mitra will be remembered as a theorist of the ‘dirigiste’ phase of Third World development.

Involuntary Unemployment in a Neoclassical Growth Model with Public Debt and Human Capital

Abstract Even more than eight decades since the publication of Keynes’ “General Theory of Employment, Interest, and Money” modern macroeconomists disagree on the notion of “underemployment equilibrium” with so-called “involuntary unemployment”. While the majority of macro theorists trace involuntary unemployment back to frictions and rigidities in the adaptation of wages and output prices to market imbalances, a minority position holds that even under perfectly flexible output prices and wage rates involuntary unemployment might occur. Morishima in “Walras’ Economics” and more recently Magnani presume that contrary to the majority view aggregate investment is not perfectly flexible but governed by “animal spirits” of investors. The aim of the present paper is to integrate the Morishima-Magnani approach into a Diamond-type overlapping generations’ (OLG) model with internal public debt subsequently extended by human capital accumulation. It turns out that in spite of perfectly flexible real wage and interest rate involuntary unemployment occurs in intertemporal general equilibrium when aggregate investor sentiments are too pessimistic regarding the rentability of investment in real capital. In the model extended by human capital a higher public debt to output ratio decreases unambiguously involuntary unemployment, if initially the endogenous output growth rate is higher than the real interest rate.

Disparity in the wages of agricultural labourers in India: An interval-valued data analysis

This study explores the interval-valued data analysis techniques to witness the spatial disparity in the wage rates of farm labourers in India. Farm labourers constitute more than half of the total workforce engaged in Indian agriculture. Also, farmers' expenses towards labour charges account for more than 50 per cent of the total variable cost of production for most crops.Using the time series data on the nominal farm wage rates paid at different agriculturally important states, the interval-valued series are built. The inflation-adjusted real wage rates are found and both nominal and real wage rate data are used to find the average range of the farm wage rates over the agricultural years for a decade. Using the time series analysis techniques, viz. autoregressive integrated moving average-artificial neural network (ARIMA-ANN) hybrid model and vector autoregressive moving average (VARMA) model, the interval-valued data on nominal wage rates are modelled and the best model for forecasting is identified using forecast evaluation methods. The results established the presence of spatial disparity and the forecasts indicated that this disparity is not going to narrow down in future unless some policy intervention takes place.

An exhaustible resources model in a dynamic input\u2013output framework: a possible reconciliation between Ricardo and Hotelling

This study investigates the problem of exhaustible resources using a dynamic input–output model with classical features. Following past research on the topic, further reconciliation can be made between the analyses of Ricardo and Hotelling on exhaustible resources by introducing resource-searching activities. The study’s model is based on a given real wage rate and a given consumption vector. The model reveals that the paths of prices, royalties, rents, intensities of production and searching processes can be determined once a sequence of profit rates as well as the initial amounts of commodities and resources are given. This paper also discusses the circumstances under which commodity prices are constant when exhaustible resources exist, based on the model presented.

Movement of Real Wage Rate and Labour Productivity in Manufacturing Sector in India: The Role of Contract Labour

The present study attempts to find out the relationship between real wage rate and labour productivity as well as the wage share and labour’s terms of trade in the manufacturing sector in India at both aggregated and disaggregated levels, during the post reform years. The empirical analysis reveals that in the organized manufacturing industry the declining wage share neutralizes the effect of increasing labour productivity resulting in stagnant wage rate growth. This absence of a link between productivity and real wage may be largely due to lower bargaining power and structural problems, including high unemployment, low wages, growing contractualisation of labour force and the large share of the informal sector in the Indian manufacturing sector. To bring back the economy to a stable growth path, efficient policy efforts on the part of the government are necessary to link productivity with real wage growth.

THE SCOPE FOR NON‐PROFIT OBJECTIVES IN A MIXED OLIGOPOLY UNDER INTERNATIONAL COMPETITION

ABSTRACTWe ask how the scope for non‐profit objectives in a state‐owned enterprise (SOE) in a mixed oligopoly changes because of competition from firms in another country. There is no change if costs and demand are given, unless the trade partner is a low‐cost country. However, the scope for non‐profit objectives is limited by the country's relative size if wages are market‐clearing and if workers and firms are stationary, because of reduced competitiveness caused by higher real wage rates. The total surplus is then not affected by the actions of the SOE. International trade does not otherwise reduce the scope for its non‐profit objectives if workers and firms are mobile, but productivity differences might require restrictions in order to avoid a complete relocation of the workforce in either country.

An Analysis of Growth and Association between Labour Productivity and Wages in Indian Textile Industry

India is one of the largest textile producers in the world. Textile industry is huge employment-providing industry after agriculture in India. The present article is an attempt to analyse first, the growth and composition of employees engaged in textile industry in India. Second, to find the growth and relation between employments, man-days employed, wages and net value added (NVA) by textile industry in India. And lastly, the impact of labour productivity in wage determination is also analysed. The results suggested that there is huge gender disparity in employment, that is, women are very few in comparison to men workers. Overall employment in textile has an increasing trend among both categories of textile industry. Further, spinning, weaving and finishing of textile manufacturing is growing faster than manufacturing of other textiles. Employment in textile industry has a positive and significant correlation with real wage rates in both categories of industries. This indicates that increase in real wage rate causes enhancement in employment in textile manufacturing. And further results suggest that labour productivity is a significant determinant of wage rate of textile employees.

Estimating regional returns to education in India: A fresh look with pseudo-panel data

This study analyzes the effects of socio-economic factors on the real wage rates for male workers in India over the period 1983–2010. In particular, we examine the role of human capital by estimating the Mincerian wage equation. We construct a regional level pseudo-panel data set for our analysis. Our findings show that while the return to primary education is remarkably high, the returns to other, higher, levels of education are equally remarkably low for all of India taken together, becoming progressively so as the level of education increases. These findings are in contradistinction to those of the other studies on returns to education in India, all of which, however, have relied on cross-sectional data for their analyses. We also find relatively little effects of caste, tribe and religion on real wage rates in India, suggesting that these factors may not be as important as is sometimes believed.

The case for reindustrialisation in developing countries: towards the connection between the macroeconomic regime and the industrial policy in Brazil

AbstractThe majority of economic literature tends to discuss economic development issues by analysing the industrial policy and other long-term development policies separate from short-term macroeconomic policy. However, development strategies require a close coordination of the macroeconomic regime with the industrial policy. In addition to Brazil, our analytical discussion and normative implications can be addressed to other developing countries also facing premature deindustrialisation. We propose an analytical discussion of the phenomena of industrialisation, deindustrialisation and reindustrialisation, including a discussion on the connection between the macroeconomic regime and industrial policy, both oriented to reindustrialisation and catching up. The main point is that both policy regimes must be closely coordinated with each other. Concerning the macroeconomic regime, we argue that consistent monetary, fiscal, wage and exchange rate policies are those which are able to not only keep price stabilisation, but also provide average real interest rates below the average real return rates on capital, a competitive real exchange rate and real wage rates increasing in accordance with labour productivity growth. As for industrial policy, theoretical and empirical evidence suggest strategies aimed at the diversification of production, processes and products, especially within the manufacturing sector and within tradable segments of the service sector.

The Incidence of the Corporate Income Tax on Wages: Evidence from Canadian Provinces

The Incidence of the Corporate Income Tax on Wages: Evidence from Canadian Provinces

EXPLORACIÓN DE LA ASOCIACIÓN ENTRE LA TASA DE CRECIMIENTO DE LOS SALARIOS REALES Y LA TASA DE DESEMPLEO EN MÉXICO, 1895-2004

Los objetivos del documento son tres. A manera de marco teórico replicar dos estudios que fundaron la literatura que nos ocupa, a saber, Phillips (1958), y Samuelson y Solow (1960), y revisar dos antecedentes “desconocidos”: Fisher (1926) y Sultan (1957). El segundo, examinar cuidadosamente las fuentes estadísticas sobre empleo y población económicamente activa, y construir algunas medidas del desempleo. El tercer objetivo, estimar la curva de Phillips para México a lo largo del siglo XX. Los resultados sugieren la existencia de una asociación negativa entre la tasa de crecimiento de los salarios reales y la tasa de desempleo para nuestro país entre los años de 1895 y 2004.

REAL WAGE STAGNANCY: EVIDENCE FROM TAIWAN

This study examines how and why the gap between economic growth and real wage growth in Taiwan is widening, a phenomenon that contrasts sharply with South Korea, which has a similar industrial structure to that of Taiwan. We empirically demonstrate that, despite the continued growth of labor productivity, the benefits from economic growth allocated to workers have been falling, and that this process has accelerated following the 2008–2009 financial crisis. The labor market institutional effect contributed partially to the problem. Workers’ purchasing power, measured by the real consumption wage rate, has been declining for a relatively long period, implying significant deterioration of terms-of-trade, and cutting real wage growth by as much as 2.23% per year. The terms-of-trade effect is particularly prominent in the manufacturing sector, which is highly export-oriented. Moreover, we found cash wages to be very sensitive to the rise in the rate of unemployment, and to the changes in output performance of the industry in which the workers are employed. The latter factor significantly reduced the cash wages paid to workers in the manufacturing sector, which highlighted the waning of workers’ bargaining power regarding wages, as well as the negative impact of globalization on the labor market. We therefore conclude that the deterioration of terms-of-trade, increases in the aggregate unemployment rate, the adverse globalization effect and the institutional effect might be the main driving forces for real wage stagnancy in Taiwan.

Social Insurance Reform and Labor Market Outcomes in Sub-Saharan Africa: Evidence from Ethiopia

This paper examines the labor market implications of a mandatory social insurance scheme introduced in Ethiopia in 2011 for private sector employees in the formal sector. We use firm-level panel data and exploit differences in pre-reform pension plans across firms to identify the effects of the reform. We find no evidence of employers fully shifting the cost of pension benefits to workers in the form of lower wages. In fact the reform seems to be associated with an increase in real wage rates particularly among large firms. Firm-level employment declined after the reform with a greater contraction among firms without pre-reform provident funds and firms that were initially small. The composition of the workforce also shifted in favor of skilled workers although this effect may not be attributed entirely to the pension reform. We also find an increase in firm-level investment, capital per worker, and labor productivity.

Post reforms dynamics in India's labour market

A slew of studies provide evidence that India's economy started growing at an accelerated rate consequent to the launch of reforms in the economy in early 1990s. But has favourable quantitative and qualitative changes occurred in the labour market consequent to the acceleration in the growth rate in the economy in the reforms era? This paper analyses the changes in India's labour market in the reforms era vis-a-vis the pre-reforms era by drawing on official data. Specifically, the paper seeks to capture changes in employment and unemployment, structural change in the labour market, changes in informal and formal employment, changes in real wage rates and incidence of working poor in the economy. The paper has also tried to examine the changing role of the state towards labour in the reforms era.

INTERESET RATE UNCERTAINTY AND FDI PRE-GLOBALISATION-

Exchange Rate uncertainty prior to the Euro were deemed an important impediment to Foreign Direct Investment Flows. This paper confirms that they were the main cause preventing optimal Private Corporate Sustainability during this era. This paper was researched with several industries in mind; automotive; textile and manufacturing sectors. It continues to serve as a key pillar for private sustainability goals in the automotive sector. Exchange Rate Uncertainty supercedes the effects of tax rate differentials and real wage rate differentials. The methodology used was OLS econometric techniques and the data was transformed into annual growth rates in order to achieve scientific compatibilities in my research methodology.