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The Neoclassical Determinants of Real Wage

Author

Listed:
  • Mehmet Ivrendi

    (Department of Economics, Pamukkale University)

  • Bulent Guloglu

    (Department of Economics, Pamukkale University)

  • Ý. Hakan Yetkiner

    (Department of Economics, Izmir University of Economics)

Abstract

This paper presents empirical evidence that the neoclassical explanation of real wage has a high explanatory power at macro level. The factor endowments explanation of wage is surprisingly rare in the literature, at least at empirical level. In this paper, using panel data from 26 OECD countries, we show that technology and factor endowments (physical capital and labor stocks) have a significant explanatory power on the determination of real wage. Based on our results, we speculate that the supply-side rather than demand-side variables may be the major source of wage differences across countries.

Suggested Citation

  • Mehmet Ivrendi & Bulent Guloglu & Ý. Hakan Yetkiner, 2013. "The Neoclassical Determinants of Real Wage," Working Papers 1304, Izmir University of Economics.
    • Handle: RePEc:izm:wpaper:1304
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    File URL: http://eco.ieu.edu.tr/wp-content/wp1304.pdf
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    References listed on IDEAS

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    1. Philip Du Caju & Gábor Kátay & Ana Lamo & Daphne Nicolitsas & Steven Poelhekke, 2010. "Inter-Industry Wage Differentials In EU Countries: What Do Cross-Country Time Varying Data Add to the Picture?," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 478-486, 04-05.
    2. Michael Clemens & Claudio Montenegro & Lant Pritchett, 2008. "The Place Premium: Wage Differences for Identical Workers across the U.S. Border," Working Papers 148, Center for Global Development.
    3. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
    4. Erkan Erdil & I. Hakan Yetkiner, 2001. "A comparative analysis of inter-industry wage differentials: industrialized versus developing countries," Applied Economics, Taylor & Francis Journals, vol. 33(13), pages 1639-1648.
    5. Wagner, Joachim, 1990. "An international comparison of sector wage differentials," Economics Letters, Elsevier, vol. 34(1), pages 93-97, September.
    6. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
    7. Erica L. Groshen, 1988. "Why do wages vary among employers?," Economic Review, Federal Reserve Bank of Cleveland, vol. 24(Q I), pages 19-38.
    8. Maury Gittleman & Edward N. Wolff, 1993. "International Comparisons Of Inter‐Industry Wage Differentials," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(3), pages 295-312, September.
    9. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Citations

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    Cited by:

    1. DiPietro, William R., 2015. "Wages And Corporate Dominance," Ekonomika, Journal for Economic Theory and Practice and Social Issues, Society of Economists Ekonomika, Nis, Serbia, vol. 61(1), pages 1-8, March.
    2. William R. DiPietro, 2015. "Wages And Corporate Dominance," Ekonomika, Journal for Economic Theory and Practice and Social Issues 2015-01, „Ekonomika“ Society of Economists, Niš (Serbia).

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    More about this item

    Keywords

    wage; factor endowment; inter-country wage differences; panel data;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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