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Labour Demand and Wage-induced Innovations: Evidence from the OECD countries

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  • Jakob Madsen
  • Richard Damania

Abstract

This paper shows that increasing real wages steepens or reverses the slope of the labour demand schedule because increasing wages give firms incentives to innovate and to invest in newer and more efficient vintages of capital. Using macroeconomic data for the OECD countries it is shown that the efficiency inducement of higher real wages steepens the traditional neoclassical labour demand function substantially. Taking into account the adverse demand effects of wage reductions it is doubtful that real wage reductions are a cure for the unemployment problem in the OECD countries.

Suggested Citation

  • Jakob Madsen & Richard Damania, 2001. "Labour Demand and Wage-induced Innovations: Evidence from the OECD countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(3), pages 323-334.
    • Handle: RePEc:taf:irapec:v:15:y:2001:i:3:p:323-334
    DOI: 10.1080/02692170110052365
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    References listed on IDEAS

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    Cited by:

    1. Abbas Valadkhani, 2003. "An Empirical Analysis of Australian Labour Productivity," Australian Economic Papers, Wiley Blackwell, vol. 42(3), pages 273-291, September.
    2. Tim Bulman & John Simon, 2003. "Productivity and Inflation," RBA Research Discussion Papers rdp2003-10, Reserve Bank of Australia.
    3. Liu, Shanmin & Zhuo, Yangyuan & Shen, Xinyue & Cai, Mengda & Yang, Ye, 2023. "The impact of declined social insurance contribution rate on enterprise total factor productivity: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 87(C).
    4. Yu Liu & Mingde Jia, 2023. "The Impact of Population Aging on Green Innovation: An Empirical Analysis Based on Inter-Provincial Data in China," Sustainability, MDPI, vol. 15(4), pages 1-18, February.

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