Date of Award

1-1-2001

Thesis Type

Masters

Document Type

Thesis

Divisions

Faculty of Business and Economics

Department

-

Institution

Universiti Malaya

Abstract

A lot of focus has been placed on the importance of the relationship between wages and labour productivity in view of increasing competition due to the globalization of economies. Therefore, this paper attempts to examine whether the increase in real wages is commensurate with higher increase in labour productivity. The model of this study is adapted from Carneiro's (1998) paper which is based on union-firm wage bargaining model. This paper analyses both the long-run and short-run dynamics of wage formation in Malaysian manufacturing as a whole and also 13 sub-selected sectors of manufacturing industry using the Eagle and Granger (1987) theorem. The theorem permits the separation of the long-run equilibrium information from the the long-run equation as an error correction term (ECT) to capture long-run disequilibrium in short-run dynamics. Before proceeding with the regression, the time series data was checked for stationarity. Although the variables which means that the regression is not spurious. The results of paper show that labor productivity is positively related to real wages in Malaysian manufacturing. However, the increase in real wage is faster than the increase in labour productivity thus causing an increase in unit labour cost. In the short-run, the relationship between real wage and labour productivity is negative and insignificant statistically. This may be attributed to the lag adjustment of money wages caused by collective bargaining agreements. It is imperative for the industry to rationalize costs through productivity increases in order to enhance competitiveness. The final part of this study discusses various productivity-linked wage policy recommendations.

Initial

snms

Additional Information

Dissertation (M.A) -- Faculty of Business and Economics, Universiti Malaya, 2002.

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