Wage Moderation and Labour Productivity
CPB Netherlands Bureau for Economic Policy Analysis, 2004 - Labor productivity - 36 pages
"In the Dutch economic policy debate, wage moderation is widely considered as a key factor for achieving economic growth and low unemployment. However, some economists criticise the policy emphasis on wage moderation, claiming that high wages are needed to maintain structural labour productivity growth. This paper analyses the effects of a wage push on labour productivity within the framework of endogenous technological progress, endogenous technology adoption and insufficient competition. The conclusion is that a wage push raises labour productivity in the short run. However, this rise in labour productivity is temporary and inefficient. In the long run, a wage push may well harm labour productivity. The main message of the paper is that it is probably best not to use wage policy at all as a tool to influence productivity. As a tool against unemployment, however, it is very effective. These insights are applied in a review of the Dutch post-war productivity growth."--Editor.
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A stylised model of wage moderation
Exogenous labour augmenting technological progress
Endogenous technological progress
5 other sections not shown
Acemoglu acyclic algorithm for determining algorithms for detecting application arbeidsproductiviteit augmenting technological progress bargaining basic algorithm capital-labour ratio competition contraction operations contraction rules CPB Discussion Paper CPB Netherlands creative destruction cutset algorithm cycle detecting redundant feedback directed graph Dutch econometric models economy effect efficiency units endiſ endogenous exogenous wage push feedback chains feedback set feedback variables feedback vertex set Festa flag Frank de Jong given in figure graph contraction Hague Telephone heuristic choice higher Huizinga incoming edge innovation investment jacobian July 2002 ISBN labour augmenting technological labour productivity growth labour-saving Levy and Low Mooij Netherlands November 2003 ISBN old firms ordering algorithm P.O. Box Pardalos profits R&D sector raise productivity Random graphs redundant feedback vertices relative removing redundant feedback replacement rate result Richard Nahuis self-loop shift Sjef Ederveen sunk cost system of equations Telefax unemployment rate union preferences wage equation wage moderation wage policy Wassenaar workers X-inefficiencies