International Comparisons of the Real Wage—Employment Relationship

What is it about?

This paper investigates the existence of a long-run relationship between real wages and employment. Using data from ten different countries since 1950, this study finds scant statistical evidence for a long-run relationship between these two variables. Thus, the results presented here cast doubt on the existence of a long-run equilibrium aggregate real wage-employment relationship as proposed by neoclassical economists. The study implies that real-wage reduction is by no means sufficient to induce an expansion of output and employment.

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