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Abstract
The Walrasian theory of labor market equilibrium predicts that in the absence of any market frictions, workers earn a wage rate equal to their marginal productivity. However, this observation is not supported empirically for various economies. Based on the neoclassical tradition, the ratio of the marginal product of labor to real wages is generally defined as the Pigouvian exploitation rate. In this paper, the authors calculate this specific wage-productivity gap for the manufacturing sector in OECD economies and investigate its relation to the unemployment rate along with other variables such as government taxation, capital expansion, unionization, inflation. The authors find that the wage productivity gap gives a robust and significantly positive response to shocks to the unemployment rate and negative response to shocks to unionization.
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The data set for this article can be found at: http://hdl.handle.net/1902.1/20400
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I think it is a nice applied paper illustrating a novel result with a novel dataset. Even though, it is not surprising to me that MPL=w equality is quite distorted for OECD economies, the paper conducts an in-depth analysis of the factors that are associated with the MPL/w ratio. I ...[more]
... very much believe that the paper deserves publication; however I have 2 minor comments the discussion of which might add some more value to the paper:
1- The authors might extend the section on the theoretical framework a bit more and add an in-depth discussion of the search-theoretic literature.
2- Even though they dont have to present all the results of it, the authors might at least mention results of static panel data estimations (fixed-effects or random effects) or dynamic panel data estimations in the fashion of Arellano and Bond (1991)
We will address your comments in the revised draft of the paper once we collect all the readers'/reviewers' comments and suggestions.