The wage-productivity nexus in the world factory economy

Abstract

This paper highlights new findings on the wage-productivity nexus in the World Factory Economy. After presenting the long-run macro-elasticity characterizing the phase of Chinese economic development since the eighties, we look at the wage-productivity nexus from a micro level perspective using a detailed firm-level dataset covering the period of ownership restructuring (1998-2007). A few results are quite robust under different estimation strategies. First, throughout the impressive Chinese economic miracle, elasticities of real wages to productivities-that is the ratios of rates of variations of the former to the latter-are always positive both under pooled and longitudinal estimates, both at firm-and sectoral-levels. Second, such elasticities are dramatically low, and falling in many distinct phases since the late seventies. That is, even in the manufacturing sector, the distribution of gains from the impressive labour productivity growth appears to be markedly uneven. Finally, third, governance institutions seem to matter a lot, with the majority of ownership types exhibiting firm-specific wage determination processes. The low elasticities of wages to productivity are plausibly the consequence of the massive flow of migrant workers from the rural areas to the coasts, somewhat resembling the early phase of the English Industrial Revolution with the pattern of enclosure in the countryside and massive migrations to the industrial towns.

A cross-sectoral analysis of the relation between labor productivity and labor compensation in the European Union

“…Overall, Tables 6, 7, 8 and 9 confirm the existence of a gap between productivity and pay in all four industries. This gap is in line with previous studies (Anderson, 2007;Bildirici, Alp, 2008;Pessoa, Van Reenen, 2012;Van Biesebroeck, 2015;Serrano, 2016;Ravikumar, Shao, 2016;ILO, 2016;Brill et al, 2017;Stansbury, Summers, 2017;Dosi et al, 2020;Schröder, 2020;Ioan, Ioan, 2020). The results also tell us that despite that gap, the link between productivity and compensation is not broken.…”

“…Further, the transnational dimension of the dataset, the specific characteristics of a customs union such as the EU, and the range of empirical tools used add to the novelty of the paper. The results confirm the existence of a gap between those two variables as mentioned in previous studies (Anderson, 2007;Bildirici, Alp, 2008;Pessoa, Van Reenen, 2012;Van Biesebroeck, 2015;Serrano, 2016;Ravikumar, Shao, 2016;ILO, 2016;Brill et al, 2017;Stansbury, Summers, 2017;Dosi et al, 2020;Schröder, 2020;Ioan, Ioan, 2020). The findings also tell us that despite that gap, the link between productivity and pay is not broken.…”

“…The observed gap between productivity and pay has led some scholars (Anderson, 2007;Bildirici, Alp, 2008;Pessoa, Van Reenen, 2012;Van Biesebroeck, 2015;Serrano, 2016;Ravikumar, Shao, 2016;ILO, 2016;Brill et al, 2017;Stansbury, Summers, 2017;Dosi et al, 2020;Schröder, 2020;Ioan, Ioan, 2020) to ask if the link between those two variables is not actually broken. Given the key role played by wages and labor market institutions in the construction of long-lasting economic activities, the steady gap between the growth rates of productivity and pay can lead to imbalances affecting not only inflation, interest rates, household consumption and aggregate demand, but also social justice (Summers, 2013;Van Biesebroeck, 2015;Pasimeni, 2018).…”

Efficiency Wage and Productivity in the Indian Microfinance Industry: A Panel Evidence

“…Since very little of the literature has investigated the impact of EW on the productivity of the microfinance industry, we have relied on the existing contributions from other sectors (e.g., Dosi et al, 2020). Based on the intuition of EW and productivity hypothesis, we considered the following econometric model: …”

“…2.We have considered a specific measure of labor productivity (output and total labor force ratio) rather than a more general total factor productivity (TFP) in accordance to other similar studies in the literature (Dosi et al, 2020). …”