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Analyzing the Productivity-Wage-Unemployment Nexus in Malaysia: Evidence from the Macroeconomic Perspective

Author

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  • Soo Khoon Goh
  • Koi Nyen Wong

Abstract

Using multivariate cointegration and error-correction modeling techniques, this paper attempts to examine whether there exists a productivity-wageunemployment relationship in Malaysia at the macroeconomic level. The main findings show that unemployment is dichotomized from the long-run equilibrium relationship between labor productivity and real wages, implying labor productivity is an important long-run factor in determining real wages, while unemployment has negligible effect on the real wage rates. However, the real wages are very responsive to a change in labor productivity, signaling the labor market is tight that leads to an increase in unit labor cost. To be more resilient to rising wages and productivity gap in a globally competitive environment, the Malaysian industries should move up the value chain, and promote skill- and technology-intensive production.

Suggested Citation

  • Soo Khoon Goh & Koi Nyen Wong, 2010. "Analyzing the Productivity-Wage-Unemployment Nexus in Malaysia: Evidence from the Macroeconomic Perspective," Monash Economics Working Papers 12-10, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2010-12
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2010/1210productivitygohwong.pdf
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    Citations

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    Cited by:

    1. Nir Klein, 2012. "Real Wage, Labor Productivity, and Employment Trends in South Africa: A Closer Look," IMF Working Papers 2012/092, International Monetary Fund.
    2. José Abraham López Machuca & Jorge Eduardo Mendoza Cota, 2017. "Salarios, desempleo y productividad laboral en la industria manufacturera mexicana. (Wage, Unemployment and Labor Productivity in the Mexican Manufacturing Industry)," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 185-228, October.
    3. Nurliyana Mohd Basri & Zulkefly Abdul Karim & Noorasiah Sulaiman, 2020. "The Effects of Factors of Production Shocks on Labor Productivity: New Evidence Using Panel VAR Analysis," Sustainability, MDPI, vol. 12(20), pages 1-23, October.
    4. Ali, Muhammad Fadzli & Akber, Md. Ali & Smith, Carl & Aziz, Ammar Abdul, 2021. "The dynamics of rubber production in Malaysia: Potential impacts, challenges and proposed interventions," Forest Policy and Economics, Elsevier, vol. 127(C).
    5. Mohammad Zulfan Tadjoeddin, 2016. "Earnings, productivity and inequality in Indonesia," The Economic and Labour Relations Review, , vol. 27(2), pages 248-271, June.
    6. Gurvich, Evsey & Vakulenko, Elena, 2017. "Macroeconomic and structural properties of the Russian labor market: A cross-country comparison," Russian Journal of Economics, Elsevier, vol. 3(4), pages 411-424.

    More about this item

    Keywords

    Real wages; productivity; Malaysia;
    All these keywords.

    JEL classification:

    • J39 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Other

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