IDEAS home Printed from https://ideas.repec.org/a/taf/jbemgt/v18y2017i3p451-467.html
   My bibliography  Save this article

Is the great decoupling real?

Author

Listed:
  • Marinko Škare
  • Damian Škare

Abstract

The great decoupling is real. Productivity and employment/wages link changed after 1980 in many countries, not just the U.S. This study investigates the productivity and employment/wages link (1950–2014) looking for empirical proof of the “great decoupling” put forward by Brynjolfsson and Mcafee (2013). The results should stimulate policymakers to openly question why real wages and productivity don’t line up with the theory. We use the Hodrick and Prescott (1997) filter to isolate trends in real wages, labor share in GDP, and labor productivity and rolling correlation to explore if the great decoupling is real. We have found that the great decoupling i.e. the divergence between real wages/employment and productivity is present in all countries (10 in the sample). The dynamics of the great decoupling are however different between the countries although year 1980 seems to be a dominant breaking point for the start of the phenomena. This paper provides multicounty empirical proof of the presence of the great decoupling phenomena and explores its dynamics over 1950–2014. Policy makers as well as firms and unions should take the existence of this phenomena seriously since it can have significant consequences on economic growth and labor markets’ functioning.

Suggested Citation

  • Marinko Škare & Damian Škare, 2017. "Is the great decoupling real?," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 18(3), pages 451-467, May.
    • Handle: RePEc:taf:jbemgt:v:18:y:2017:i:3:p:451-467
    DOI: 10.3846/16111699.2017.1323793
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.3846/16111699.2017.1323793
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.3846/16111699.2017.1323793?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    2. Michael Spence, 2002. "Signaling in Retrospect and the Informational Structure of Markets," American Economic Review, American Economic Association, vol. 92(3), pages 434-459, June.
    3. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
    4. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    5. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
    6. Douglas O. Staiger & Joanne Spetz & Ciaran S. Phibbs, 2010. "Is There Monopsony in the Labor Market? Evidence from a Natural Experiment," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 211-236, April.
    7. Oreopoulos, Philip, 2007. "Do dropouts drop out too soon? Wealth, health and happiness from compulsory schooling," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2213-2229, December.
    8. Philip Oreopoulos & Till von Wachter & Andrew Heisz, 2012. "The Short- and Long-Term Career Effects of Graduating in a Recession," American Economic Journal: Applied Economics, American Economic Association, vol. 4(1), pages 1-29, January.
    9. Van Biesebroeck, Johannes, 2011. "Wages Equal Productivity. Fact or Fiction? Evidence from Sub Saharan Africa," World Development, Elsevier, vol. 39(8), pages 1333-1346, August.
    10. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thomas Ziesemer, 2023. "Labour-augmenting technical change data for alternative elasticities of substitution: growth, slowdown, and distribution dynamics," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 32(4), pages 449-475, May.
    2. Walter Paternesi Meloni & Antonella Stirati, 2021. "What has driven the delinking of wages from productivity? A political economy-based investigation for high-income economies," Working Papers PKWP2104, Post Keynesian Economics Society (PKES).
    3. Daniel Ossa, 2024. "Gender Wage Gap, Wage-Productivity Decoupling, and the Rate of Profit," Review of Radical Political Economics, Union for Radical Political Economics, vol. 56(1), pages 51-69, March.
    4. González-Rozada, Martín & Ruffo, Hernán, 2024. "Do trade agreements contribute to the decline in labor share? Evidence from Latin American countries," World Development, Elsevier, vol. 177(C).
    5. Walter Paternesi Meloni & Antonella Stirati, 2023. "The decoupling between labour compensation and productivity in high‐income countries: Why is the nexus broken?," British Journal of Industrial Relations, London School of Economics, vol. 61(2), pages 425-463, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gómez-Puig, Marta & Sosvilla-Rivero, Simón, 2018. "Nonfinancial debt and economic growth in euro-area countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 56(C), pages 17-37.
    2. Luis A. Gil-Alana & Marinko Skare, 2018. "Testing the great decoupling: a long memory approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(4), pages 801-820, November.
    3. Gómez-Puig, Marta & Sosvilla-Rivero, Simón, 2017. "Heterogeneity in the debt-growth nexus: Evidence from EMU countries," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 470-486.
    4. Michał Mackiewicz, 2021. "The sustainability of fiscal policy in southern African countries–a comparative empirical perspective," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 18(2), pages 337-350, April.
    5. Vassilis Monastiriotis & Cigdem Borke Tunali, 2020. "The Sustainability of External Imbalances in the European Periphery," Open Economies Review, Springer, vol. 31(2), pages 273-294, April.
    6. Campos, Eduardo Lima & Cysne, Rubens Penha, 2017. "A time-varying fiscal reaction function for Brazil," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 795, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    7. R. Santos Alimi, 2014. "ARDL Bounds Testing Approach to Cointegration: A Re-Examination of Augmented Fisher Hypothesis in an Open Economy," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 2(2), pages 103-114, June.
    8. Z Fang & D Ding & C Guan, 2024. "Does Methodology Matter? Revisiting the Energy-growth Nexus in Asia Pacific Economies," Economic Issues Journal Articles, Economic Issues, vol. 29(1), pages 5-34, March.
    9. Athanasia Gavala & Nikolay Gospodinov & Deming Jiang, 2006. "Forecasting volatility," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 25(6), pages 381-400.
    10. Federico Huneeus & Kory Kroft & Kevin Lim, 2021. "Earnings Inequality in Production Networks," NBER Working Papers 28424, National Bureau of Economic Research, Inc.
    11. Herzer Dierk, 2022. "Semi-endogenous Versus Schumpeterian Growth Models: A Critical Review of the Literature and New Evidence," Review of Economics, De Gruyter, vol. 73(1), pages 1-55, April.
    12. Vicente Esteve & Manuel Navarro-Ibáñez & María A. Prats, 2013. "The present value model of US stock prices revisited: long-run evidence with structural breaks, 1871-2010," Working Papers 04/13, Instituto Universitario de Análisis Económico y Social.
    13. Keen Meng Choy & Hwee Kwan Chow, 2004. "Forecasting the Global Electronics Cycle with Leading Indicators: A VAR Approach," Econometric Society 2004 Australasian Meetings 223, Econometric Society.
    14. Atanu Ghoshray & Issam Malki, 2021. "The share of the global energy mix: Signs of convergence?," Bulletin of Economic Research, Wiley Blackwell, vol. 73(1), pages 34-50, January.
    15. Gomez Zaldivar, M. & Ventosa-Santaularia, D., 2009. "Bilateral Relationship between Consumption and GDP in Mexico and the USA: A Comment," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 9(1).
    16. Venus Khim-Sen Liew & Hock-Ann Lee & Kian-Ping Lim & Huay-Huay Lee, 2008. "Linearity and Stationarity of South Asian Real Exchange Rates," The IUP Journal of Applied Economics, IUP Publications, vol. 0(5), pages 48-58, September.
    17. V. Vandenberghe, 2018. "The Contribution of Educated Workers to Firms’ Efficiency Gains: The Key Role of Proximity to the ‘Local’ Frontier," De Economist, Springer, vol. 166(3), pages 259-283, September.
    18. Isabel Cortés-Jiménez & Manuel Artís, 2005. "The role of the tourism sector in economic development - Lessons from the Spanish experience," ERSA conference papers ersa05p488, European Regional Science Association.
    19. Ewing, Bradley T. & Sari, Ramazan & Soytas, Ugur, 2007. "Disaggregate energy consumption and industrial output in the United States," Energy Policy, Elsevier, vol. 35(2), pages 1274-1281, February.
    20. Rossi, Barbara, 2005. "Confidence Intervals for Half-Life Deviations From Purchasing Power Parity," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 432-442, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:jbemgt:v:18:y:2017:i:3:p:451-467. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/TBEM20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.