Real Wages Research Articles

법인세의 분배효과에 관한 연구

This study analyzes the effect of corporate income tax on income distribution in Korea. Studies on the economic effects of corporate income tax have mainly focused on investment and employment effects. This research trend is due to the prevailing idea that the investment effect of corporate income tax is decisive, employment and wages are determined incidentally, and that companies are merely conduits for distributing profits to shareholders. However, corporate income tax also affects the labor income share and household income distribution through changes in employment and wages, dividends, and internal reserve fund of a company. If corporate income tax cuts increase investment, but employment growth is weak and real wage growth rates falls short of labor productivity growth rates, the labor income share will decrease and household income inequality will widen. According to the results of the empirical research, the effects of corporate income tax rate on investment and employment are weak. The expanded investment is also capital-intensive, so the employment effect is not significant, and more the real wage increase does not keep up with labor productivity. As a result, a reduction in the effective corporate income tax rate lowers the labor income share and increases income inequality. Therefore, to increase the distribution effect of corporate income tax, corporate income tax should be reformed in a way that supports employment growth and real wage increases while including investment.

Demand in the Russian Labor Market

The work deals to the construction of the labor demand function in modern Russia. This function is two-factor, with real wages and gross domestic product acting as its factors. The function in question is based on a modified labor demand function, which is a regression equation linking the labor intensity of production with the average real wage. Labor intensity in this case is interpreted as the amount of demand for labor on the part of an average Russian employer in the production of final products worth, for example, 1 million rubles per year. The product of the theoretical value of the modified demand function in a certain year by the value of GDP gives the theoretical number of employed, interpreted as the value of the demand for labor. The article presents the results based on the dynamic series of official Russian statistical information for 2001–2020 calculations that allowed us to determine the type and parameters of the modified labor demand function. The characteristic features of this function are decreasing with deceleration and relatively high elasticity. The relationship between labor intensity and wages can be described as very close. As the calculations have shown, the two-factor demand function also adequately reflects the situation on the Russian labor market.

The Economic Public Interest in a World of Oligopoly*

The Australian economy has performed well compared with comparable countries over the last three decades only if we average the excellent performance in the 1990s and the poor performance over the past decade. Real wages over the past decade have stagnated—to an extent without historical parallel. We cannot understand the economy's underperformance without recognising the increasing claims of economic rents on national income. Correction of weaknesses requires coordination of many policy instruments including measures to reduce the prevalence of rents (competition policy and regulation of oligopoly where competition is not feasible or inefficient) and changes in taxation arrangements to shift the burden of business taxation from firms in competitive activities to firms relying heavily on economic rents.

Goodbye, Mr. Portugal: Fiscal crisis, constitutional revolution, and the independence of Brazil (1808–22)

AbstractThis article provides a new interpretation of Brazil's independence that relates the process of political emancipation to the Portuguese empire's fiscal crisis at the beginning of the nineteenth century. We discuss the origins and impact of the fiscal crisis that followed the Napoleonic invasion of Portugal in 1807 and the transfer of the government to Rio de Janeiro. Quantitative evidence shows that expenditures with the palace and the army in Brazil were higher than those discussed in the previous literature. Moreover, the government was only able to finance itself by increasing loans via paper money issuances from the Bank of Brazil. Real wages show that the inflationary policy in the 1810s led to a rapid decline in living standards, fuelling dissatisfaction with the government. Our findings are consistent with views expressed in contemporary official correspondence and parliamentary debates.

Indonesian capital city relocation and regional economy's transition toward less carbon-intensive economy: An inter-regional CGE analysis

Transitioning to a low-carbon economy can take various forms, one of which is structural change, particularly tertiarization. When the economic structure shifts from being dominated by sectors that rely heavily on fossil fuels to one that does not, the economy can become less carbon-intensive. The relocation of Indonesia's capital city from Jakarta to East Kalimantan is an example of how a traditionally resource-intensive regional economy may respond to the sudden emergence of a large-scale service sector, in this case, the government sector. This paper investigates how the capital city relocation may affect the destination region's economic structure using an inter-regional computable general equilibrium modeling. The model considers not only how different economic sectors are interconnected but also how sectors within one province are interconnected with sectors in other provinces. According to the findings, the relocation of the capital city increases the Gross Regional Domestic Product (GRDP) of the destination region (KalTim) by a massive amount (22%) while decreasing the GRDP of Jakarta (the old capital) by a moderate amount (7%). However, because the expanding sector is relatively high-skill intensive, it tends to produce skill-biased increases in real wages. As a result, the destination region (Kaltim) undergoes massive structural change as its service sector share increases by 12%, a change historically comparable in two decades. In addition, Kaltim's carbon emission intensity decreases by 18% due to this large-scale tertiarization. The analysis has demonstrated how and to what extent the relocation of Indonesia's capital city may help the province diversify from a natural resource-intensive economy to a more service-oriented and low-carbon economy.

The role of multi-family properties in hedging pension liability risk: long-run evidence

PurposeUsing data spanning 145 years for Sweden, the authors investigate the benefits of holding multi-family properties for investors who aim to hedge wage growth.Design/methodology/approachThe authors assess the risk-adjusted excess return that results from adding multi-family properties to a mixed-asset portfolio that aims to track wage growth. The authors also analyse the macroeconomic determinants of asset returns. Finally, the authors test whether a causal relationship exists between the growth rate of real wages and that of real net operating income.FindingsThe benefits from holding multi-family properties are the greatest for low-risk allocation approaches. For more risky strategies, the role of real estate is more muted, and it varies greatly over time. Holding real estate was most beneficial during the first two decades of the 21st century. Multi-family properties are found to be the only asset class to be positively related to wage growth. The authors show that the net operating income acts as the transmission channel between wages and property returns.Practical implicationsThe paper assesses whether the growing interest of pension funds for multi-family properties is warranted in the context of a portfolio that aims to track wage growth.Originality/valueUsing long term data makes it possible to use a rolling windows approach and hence to consider multiple outcomes for an allocation strategy over a typical investment horizon. This permits to assess the dispersion of performance across several periods rather than just one as is commonly done in the literature. The results show that the conclusions that would be drawn from looking at the past two or three decades of data differ substantially from those for earlier time periods.

Inflation stabilization and normal utilization

This paper presents a model of inflation and distribution that examines the relationship between the employment of labor and the utilization of capital. It features a structural difference between the wage Phillips curve and the price Phillips curve that gives rise to persistent changes in the real wage whenever the inflation-neutral level of activity fails to utilize the existing capital stock at its normal level. Assuming an inflation-targeting central bank that is obliged to run the system around its inflation-neutral level, these changes will reduce the gap between the inflation-neutral level and normal utilization by moving the system along a stable wage curve. In the end this implies that the inflation-neutral level of employment and full or normal utilization of capital will tendentially coincide, lending some support to the Duménil-Lévy thesis that monetary policy makes normal utilization a long-run center of gravity.

Profits and inequality during an export boom. Evidence from tax records in Lima, Peru

ABSTRACT Some studies have shown that inequality increased in pre-1930 Latin America as the economy and foreign trade grew. Others have shown that there was no clear relationship between economic growth and inequality. The information on nineteenth-century Peru is useful to estimate income inequality during a period of rapid economic growth. This article estimates the distribution of profits in Lima between 1838 and 1859 using information from tax reports. Mobility across social classes was possible for some guild members. However, financiers and large merchants experienced higher growth in profits than artisans and small traders. In addition, a comparison of profits and wages shows that the richest entrepreneurs experienced a rapid increase in profits during a period of declining real wages. Thus, the income gap between the richest and poorest residents of Lima widened during this period.

Energy price shocks, conflict inflation, and income distribution in a three-sector model

The paper presents a model of conflict inflation to investigate the distributional effects of energy price shocks. We argue that periods of high inflation are always periods of significant redistribution of income. We analyse how such redistribution occurs along two dimensions: between workers and firms and between sectors of the economy. To study the distributional outcomes of the recent inflationary episode, we build a three-sector model comprising a domestic energy sector which provides inputs for a goods and a services sector. The model is calibrated to US sectoral data with the Method of Simulated Moments. While energy prices are set internationally, non-energy prices and nominal wages are set by firms and workers, giving rise to conflicting claims over the distribution of income. We consider three shocks that trigger inflationary distributional conflict: an energy price shock combined with demand and supply shocks to the goods sector. We find that the recent inflationary episode constitutes a price-wage rather than a wage-price spiral. The combined shocks induce non-energy firms to raise prices, which undermines real wages, and redistributes income towards firms. The sectoral demand shift towards goods in combination with pandemic-related supply bottlenecks further raises mark-ups, accelerating inflation and leading to divergence in sectoral profit margins. We compare three anti-inflationary policies: redistributing windfall profits to workers, nominal wage restraint, and aggregate demand contraction through monetary or fiscal policy. The redistribution of profits via a windfall tax is most effective in reducing inflation without reinforcing reductions in employment and labour shares.

Developments in collective bargaining during 2022 and their implications for the future

2022 saw a slight increase in the willingness of unions to use or prepare to use industrial action as part of collective bargaining. However, pay rises for employees covered by enterprise agreements generally lagged those received by the broader workforce. Employees on average saw a significant cut in their real wages. Towards the end of 2022, the recently elected Albanese government made several changes to the bargaining provisions contained in the Fair Work Act 2010 (the FW Act) with the explicit goal of increasing the pace of wage rises. By increasing union bargaining power, it is likely that these amendments will eventually lead to a higher rate of wage growth than would otherwise be the case, though a number of factors may limit likely size of any such effect.

Wage-Price Spirals

ABSTRACT: We interpret recent inflation experience through the lens of a New Keynesian model with price and wage rigidities and nonlabor inputs in inelastic supply. The model provides a natural interpretation of some features of the recent episode: an initial surge of noncore inflation, followed by a lagged response of core inflation and a further lagged, persistent response of wage inflation. The model also provides a natural way of discussing the role and the strength of wage-price spiral dynamics in price-setting models. The model interprets recent developments as symptoms of underlying supply constraints, which can be triggered by both demand and supply shocks. The immediate manifestation of these constraints is in the relative price of scarce, inelastic nonlabor inputs (including energy). The secondary effects arise because they produce a gap between lowered real wage aspirations of firms—that try to make up for higher nonlabor costs—and increased real wage aspirations of workers—caused by increased labor demand. The gap produces a wage-price spiral, which continues as long as the initial relative scarcity of nonlabor inputs persists, even though input prices are falling. In this view, the fact that nominal wage growth is currently exceeding price inflation can be given a benign interpretation, as a sign of real wages going back to trend and not necessarily as a concern of an ongoing spiral.

How unilateral tariffs harm workers under oligopoly

AbstractI study import tariffs in an asymmetric general oligopolistic equilibrium trade model. Their anti‐competitive effect reduces labour demand because firms want to shorten supply. Unilaterally increasing the import tariff raises domestic welfare at the foreign country's expense, but comes at the cost of favouring profit recipients as compared to workers, whose real wages fall. Only if initial tariffs are low, the tariff‐increasing government could use its rising tariff revenue to neutralise the distributional effect or the negative effect on workers. If supporting workers is the policy objective, tariffs do not appear to be a suitable tool under oligopoly.

Malinvaud’s and Keynes’s unemployment typologies: do they coincide?

Malinvaud’s reconsideration of the theory of unemployment emphasises the distinction between classical and Keynesian unemployment equilibria, associating the former with excessive real wages and the latter with deficient effective demand. This distinction suggests a close proximity with the one established by Keynes between voluntary and involuntary unemployment. However, Malinvaud’s typology concerns two mutually exclusive regimes, whereas Keynes’s typology concerns two coexisting unemployment categories. Besides, the former rests on the implicit view of price rigidity as the troublemaker and of price flexibility as the ultimate policy target, whereas the latter follows from the opposition between refusal to cooperate and inability to coordinate, and points to different policy strategies.

The historical role of energy in UK inflation and productivity with implications for price inflation

We model UK price and wage inflation, productivity and unemployment over a century and a half of data, selecting dynamics, relevant variables, non-linearities and location and trend shifts using indicator saturation estimation. The four congruent econometric equations highlight complex interacting empirical relations. The production function reveals a major role for energy inputs additional to capital and labour, and although the price inflation equation shows a small direct impact of energy prices, the substantial rise in oil and gas prices seen by mid-2022 contribute half of the increase in price inflation. We find empirical evidence for non-linear adjustments of real wages to inflation: a wage-price spiral kicks in when inflation exceeds about 6%–8% p.a. We also find an additional non-linear reaction to unemployment, consistent with involuntary unemployment. A reduction in energy availability simultaneously reduces output and exacerbates inflation.

Wage leadership in U.S. labour markets between alternative levels of industry and governments

ABSTRACT Interaction between public and private sector real wages in the U.S. are examined over the periods 1952–2019, 1952–1972, and 1973–2019. Industries considered include all private industries and five broad industry subcategories. Measures of U.S. state & local governments and federal government are considered, and their changing contributions to total employment across periods provides context for wage leadership. Private sector wages caused federal wages as federal employment’s share of total employment decreased throughout the periods. In contrast, state & local government’s share of total employment grew substantially in the early period, with their wages causing private sector wages. In the later period, state & local government’s share of total employment stabilized and their wages cause those in half of the private sectors to be considered, with feedback in the remaining industries.

Modeling the Impact of Public Infrastructure investments in the U.S.: A CGE Analysis

AbstractThis study offers a computable general equilibrium analysis of the $550 billion devoted to new infrastructure investment (new and remodeled physical infrastructure for transportation, information and public services) in the United States under the Infrastructure Investment and Jobs Act, a federal law signed by President Joseph Biden in November 2021. The simulations are based on the state-level distribution of funds and distinguish between the construction phase (short run) and the operational phase (long run). Gross domestic product (GDP) and labor demand react to the government spending stimulus after the first year by growing 0.24% and 0.44%, respectively. The gains derived from this investment plan are higher in the long term once investments increase the country’s capital stock; GDP increases by 1.39% and wages by 3.94%. This paper analyzes the efficiency of the current distribution of funds across sectors, and finds that the current distribution benefits the United States economy more. Even though a slightly higher GDP impact could have been reached (1.42%) if all the funds were devoted to transport services, the price increases would result in lower real wage increases.

Impact of Inflation on Real Resident Wages.

Impact of Inflation on Real Resident Wages.

Economic Globalisation and Women’s Economic Empowerment in Bangladesh: An Econometric Approach

This study aims to investigate an extensive evaluation of the relationship between economic globalisation and women’s economic empowerment in Bangladesh. Using time-series data from 1975 to 2017, the study uses the female labour force participation rate (FLFPR), an indicator of women’s economic empowerment, and the export/GDP (X/GDP) ratio, trade/GDP ratio and foreign direct investment (FDI), indicators of economic globalisation. The research examines econometrically whether economic globalisation such as X/GDP ratio, trade/GDP ratio and FDI influence FLFPR and how to control variables like population growth rate (POP) and real wage rate influence FLFPR. The estimated results show a positive and significant relationship between FLFPR and X/GDP, and RWR and a negative but significant relationship between FLFPR and trade/GDP ratio, and a negative and insignificant relationship between FLFPR and FDI, and POP. The study has employed an auto-regressive distributed lag (ARDL) model. In addition, the error correction model has been used to capture the speed of adjustment. The findings from the ARDL-bound testing approach reveal that the variables under study are cointegrated and thus have a long-run relationship. The coefficient of error correction term holds a theoretically correct sign and is also statistically significant, meaning that there exists short-run adjustment in the whole system. JEL: F1, F15, J21, O50

The cost of living in early modern cities: a study on eighteenth-century northern Italy

AbstractThis study estimates the cost of living in three cities – Florence, Bologna and Milan – in eighteenth-century northern Italy. Although they do not allow an understanding of the differences between social groups or seasonal consumption patterns, the calculation of living costs and the implied modelling have a twofold aim. First, they allow the calculation of real wages, which are obtained by dividing nominal wages by the cost of a consumption basket; therefore, broadly, they allow the Italian case to be put into great debates of economic history, such as the one on the Little Divergence between northern and southern Europe at the end of the early modern period. In this regard, we will show that the existing calculations used for this purpose have many criticalities, and we will solve them. Second, determining the cost of consumption baskets allows us to observe the role played by urban public institutions in mediating between the market and consumers, with relevant effects on price trends and, therefore, on the purchasing power of the urban population.

Gender wage inequalities in the Eurasian Union countries

Purpose of the research. To analyze the influence of factors determining the wage gap between employees, gender pay ratios in the context of individual types within the country and between countries.Methodology. In the course of the study, index analysis was used using the assortment displacement index, structural shift indices, constant and variable composition indices. Correlation and regression analysis in order to study the relationship within countries and the relationships between countries.Originality / value of the research. The value of the study lies in a new approach (using GDP ratios, at parity and in national currency, to calculate comparable real levels of wages of employees between countries by type of economic activity and by gender), which allows calculating real wage levels.Identification of the relationship that determines the differences in wages between men and women, the ratio of wages between men in different countries. Differences in wage differentiation between certain types of economic activity in the context of individual countries are analyzed.Findings. The results of the study made it possible to obtain real ideas about the level of wages, differentiation between certain types of economic activity and in the gender aspect between countries. Real dependencies and ratios of the formation of women's wages within individual countries, correlations in the levels of differentiation in the gender aspect are revealed.