Labour cost competitiveness has weakened on account of high wage growth and very limited productivity growth

2021 ◽  
Keyword(s):  
Productivity Growth ◽  
Wage Growth ◽  
Labour Cost ◽  
High Wage ◽  
Cost Competitiveness

Does competition explain growth in OECD and BRICS countries?

2019 ◽  
Vol 29 (5) ◽  
pp. 515-533
Author(s):  
Nadia Tahir ◽  
Pervez Tahir
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Wage Growth ◽  
Oecd Countries ◽  
Unit Labour Cost ◽  
Labour Cost ◽  
Competitive Environment ◽  
Content Type ◽  
Cluster Development ◽  
Brics Countries

Purpose This paper aims to explain the empirical relationship between competitiveness and economic growth in a globalizing world. In recent times, the advanced economies have experienced a slowdown of growth, whereas the BRICS countries continue to experience high growth. The authors explore the following question: Does competitiveness of nations’ degree of competition explains this differential in growth? The authors explore competiveness and growth in a macroeconomic perspective for the large economies in the OECD and BRICS countries. Design/methodology/approach The authors use dynamic panel data modelling technique to find the relationship between competitiveness and economic growth. This technique enables to control heterogeneity problem of this group to some extent. The focus variable of this study is annual GDP growth rate for the period 2007-2017. The proxies for measuring competitiveness in this paper are trade as percentage of GDP, product market regulation, unit labour cost and global competitive index. Innovation prevalence of foreign ownership, efficiency, competition, state of cluster development, venture capital availability, extent of market, research and development expenditure as percentage of the GDP mergers and acquisitions and multifactor productivity are the control variables. Findings The authors find that the degree of competitiveness competition is less likely to impact economic growth in the OECD countries because they have more or less similar competitive environment. Innovation, extent of market and state of cluster development and venture capital availability explaining growth differential. Increased competition is likely to affect growth negatively. This explains the oligopolistic structures of the world economy. However, the BRICS countries vary significantly in competitive environment. This is the reason of volatility in their growth. The conclusion is that competitiveness is important for sustained growth. Competitiveness is, however, an outcome of a set of policies, not a policy itself. Research limitations/implications Productivity data for OECD and BRICS countries are not available. Various series are not comparable. OECD countries have discontinued yearly unit labour cost series, and high frequency series are available but no such series for BRICS exists. Practical implications First, this paper proposes that wage growth, measured by the unit labour cost growth rate, is an important determinant of competitiveness amongst the nations. Wage growth is falling short of productivity growth in the OECD countries. This has implications for the long run sustainability of growth, skill development and inequalities in the region. Since 2011, world economic recovery is slow. Wage growth is imperative for generating sufficient private demand in the OECD countries. Second, this paper provides evidence that competitiveness is important for explaining growth in the OECD and the BRICS countries. However, it also highlights that competitiveness can be measured effectively by the trade differential or with the help of unit labour cost. Unaligned real effective exchange rate in terms of unit labour costs is the real cause of the problem. Originality/value Research in this area is still in infancy. This research finds that how competitiveness affects growth. A more competitive nation can sell more, but not necessarily grow rapidly. In development process, growth comes first, and at the latter stages, countries have to introduce effective reforms for competitiveness. This is the effect of competitiveness on growth by comparing various indexes.

scholarly journals Assessment of the state of social and labor sphere of rural areas in the Ural Federal District

2020 ◽  
Vol 176 ◽  
pp. 06006
Author(s):  
Victoria Kalitskaya ◽  
Andrey Pustuev ◽  
Olga Rykalina ◽  
Irina Perminova ◽  
Olga Mustafina
Keyword(s):  
Human Capital ◽  
Labor Productivity ◽  
Productivity Growth ◽  
Rural Areas ◽  
Agricultural Sector ◽  
Analytical Data ◽  
Wage Growth ◽  
Federal District ◽  
The State ◽  
Number Of Factors

The article presents the author’s calculations of the labor sphere state of rural areas of the Ural Federal District (Russia). It is substantiated that labor (human) capital is the most important element of ensuring the functioning of the entire agrarian sphere. The estimation of labor productivity in the agricultural sector, the rate of wage growth, as well as relative social and labor indicators of the agricultural direction to the general economic is conducted. The authors consider the ratio of agrolabor productivity growth and decrease in the number of workers in this sphere, which is associated with a number of factors, resulting in the construction of a system of sociolabor factors interaction contributing to the development of rural areas, based on analytical data

The Economics of Inequality in High-Wage Economies

2020 ◽  
pp. 262-286
Author(s):  
Edward Conard
Keyword(s):  
Information Technology ◽  
Interest Rates ◽  
Productivity Growth ◽  
Risk Averse ◽  
High Wage ◽  
Increased Risk ◽  
Investment Opportunities ◽  
Skilled Immigration ◽  
Low Interest Rates ◽  
Risk Reducing

The advent of information technology opened a window of investment opportunities that has exceeded the supply of properly trained talent while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics have relieved constraints to low-skilled labor and risk-averse savings. As the economy devotes more resources to raising the productivity of talent, low-skilled productivity and wage growth have slowed. With a constrained supply of risk-reducing talent allocated to more productive endeavors, an unconstrained supply of risk-averse savings has lowered interest rates. With improbable innovation needed to capitalize on the value of information, high returns to success have fortunately motivated increased risk-taking, despite the declining productivity of innovators. Proponents of income redistribution have concluded that high returns to success and slowing productivity growth, despite low interest rates, are evidence of rising cronyism, notwithstanding extensive evidence to the contrary. This chapter provides an alternative explanation.

scholarly journals Why Does Trend Growth Affect Equilibrium Employment? A New Explanation of an Old Puzzle

2012 ◽  
Vol 102 (4) ◽  
pp. 1378-1413 ◽  
Author(s):  
Michael W. L Elsby ◽  
Matthew D Shapiro
Keyword(s):  
Productivity Growth ◽  
Wage Growth ◽  
Employment Rate ◽  
Combined Effects ◽  
Reservation Wages ◽  
Returns To Experience ◽  
New Evidence ◽  
Trend Growth

That the employment rate appears to respond to changes in trend growth is an enduring macroeconomic puzzle. This paper shows that, in the presence of a return to experience, a slowdown in productivity growth raises reservation wages, thereby lowering aggregate employment. The paper develops new evidence that shows this mechanism is important for explaining the growth-employment puzzle. The combined effects of changes in aggregate wage growth and returns to experience account for all the increase from 1968 to 2006 in nonemployment among low-skilled men and for approximately half the increase in nonemployment among all men. (JEL E24, J24, J31)

scholarly journals Jacks of All Trades and Masters of One: Declining Search Frictions and Unequal Growth

2021 ◽  
Vol 3 (3) ◽  
pp. 339-352
Author(s):  
Paolo Martellini ◽  
Guido Menzio
Keyword(s):  
Labor Market ◽  
Productivity Growth ◽  
Wage Growth ◽  
Fast Growth ◽  
Search Frictions ◽  
Minimal Growth ◽  
Growth Differential ◽  
Differential Returns

Declining search frictions generate productivity growth by allowing workers to find jobs for which they are better suited. For “jacks of all trades”—workers whose productivity is similar across different jobs in their labor market—declining search frictions lead to minimal growth. For “masters of one trade”—workers whose productivity varies a great deal across different jobs in their labor market—declining search frictions lead to fast growth. A rudimentary calibration suggests that differential returns to declining search frictions may account for a non-negligible fraction of the wage growth differential between routine and nonroutine workers. (JEL J24, J31, J63, J64, O33)

scholarly journals Decomposing Productivity Growth in Chinese Manufacturing

2017 ◽  
Vol 6 (11) ◽  
pp. 279-293
Author(s):  
Bin Wang ◽  
Guangnan Zhang ◽  
James Peoples
Keyword(s):  
Technological Change ◽  
Productivity Growth ◽  
Business Environment ◽  
Manufacturing Industries ◽  
Manufacturing Companies ◽  
High Productivity ◽  
Furniture Manufacturing ◽  
Annual Productivity ◽  
Flexible Form ◽  
Cost Competitiveness

In an increasingly globalized business environment, sustaining relatively high productivity growth is essential for maintaining an international competitive advantage. Economists typically identify manufacturing companies in China as prime examples of firms attaining cost competitiveness through productivity growth. This study contributes to the analysis of productivity growth in China by estimating unexplained technological change, scale and infrastructure investment’s contribution to annual productivity growth for 27 manufacturing industries. A flexible form cost equation for manufacturing industries classified at the two-digit industry code level for the 1998-2005 sample period is used to investigate each factor’s impact on productivity growth. The findings suggest that for all industries excluding furniture manufacturing, unexplained technological change contributes to productivity growth. Infrastructure investment and scale contribute to such growth for 16 and 5 of the 27 industries respectively.

Sign in / Sign up

Export Citation Format

Share Document