Search

The quarterly empirical relationship between Mexican manufacturing labor productivity and salaries 1993-2015 is examined for causality and whether first order labor market equilibrium is evident. An equilibrium would mean salaries and labor productivity are cointegrated. Wages above productivity levels may lead to calls for government intervention in the labor market. Federal quarterly data cover the nine main divisions of the manufacturing sector (old classification) as well as manufacturing overall. We use two series: labor productivity and average salaries with adjustment for inflation using the US consumer price index (2010 = 100). The time series is from 1993.1 to 2015.3. Standard cointegration analysis with structural change is applied with structural breaks hypothesized in 2008 with the Great Recession and 1995 with the Peso crisis. Tests for stationarity are applied to potentially correct for problems using first differences. Results indicate a statistically significant and negative relationship between labor productivity and salaries early in the sample period that becomes positive after structural changes. Salaries are more sensitive to events and volatile while productivity exhibits stable growth during 1993-2015. Salaries were impacted by both the 1995 Peso crisis and the Great Recession (2008) but productivity was only impacted by the latter. Higher labor productivity has not been rewarded with higher salaries suggesting Mexican manufacturing workers are underpaid. The firms where they work therefore have excess profits that can be used for investment and/or pay raises. Only the Timber and Metals divisions are found to not have salaries and productivity cointegrated. Government intervention in the form of wage setting or wage protection to protect firms from higher labor costs is unnecessary as firms are underpaying their workers. The government should reduce its role in the manufacturing labor markets. Foreign firms can hire underpaid workers away from domestic industry and take advantage of the labor market disequilibrium. Unions can insist on higher salaries to match their highly productive members work. JEL Classifications: C22, L60, O47 Keywords: Labor Productivity, Salaries, Cointegration, Structural Change, Manufacturing, INTRODUCTION Labor market disequilibrium suggests higher salaries without higher labor productivity could produce destabilizing inflation leading to macroeconomic instability. In some countries such as Mexico, the threat of such instability [...]

Using a spatial dynamic panel, the long-run industrial sector convergence rate across Mexico's states is found to be 2%. The model is a system-General Method of Moments with correction for spatial autocorrelation and an explicit human capital input. The significant ineguality between the richest and poorest states is caused by differences in factor accumulation. Physical capital accumulation dominates in richer states while the human capital accumulation is in poorer states. Regional ineguality is predicted to grow unless there is government intervention to address the bipolar regional divide. More investment in human capital in non-industrialized states to draw strength from Mexico's diversity is recommended. Comparative Economic Studies (2015) 57, 183-202. doi: 10.1057/ces.2014.42; published online 8 January 2015 Keywords: Mexican regional convergence, physical and human capital, spatial panel analysis JEL Classification: 040, 047, Rll, R15, INTRODUCTION Mexico has always been known as a country of great diversity in fields from literature to economics. For example, regional economic diversity within Mexico has led to the poorest [...]

Using recently available night lights and electricity consumption data for the 212 municipios (counties) of Veracruz state in southern Mexico, the informal economy is analyzed at the Mexican county level for the first time with such data. Most counties between 2000 and 2006 are found to have growing informal economies though the richest county, Boca Del Rio, exhibits a decline in informality suggesting a few wealthier counties may behave differently. Counties have a larger formal economy if they are in northern areas, have higher literacy rates, and more indigenous people. The informal economy appears to have reversed its declining share of total economic activity towards more growth during the Fox era though the regional government of Veracruz remained in the hands of the PRI perhaps limiting federal reform efforts. JEL Classifications: R3, O1, F00 Keywords: Veracruz, Informal Economy, and Night Lights, INTRODUCTION The shadow or informal economy has been studied for decades using various methods ranging from adjusting national GDP (macro) to household surveys (micro) with the definition of the informal [...]

A stochastic production function analysis of the 212 regions of Veracruz province in southern Mexico reveals some inefficiency in manufacturing, mining, trade and service sectors in recent years. Poverty indices appear to influence a region's ability to combine capital and labor to create output and value added in some years indicating a reduction in poverty could contribute to job growth and putting idle capital back to work at the local level. With the agricultural crisis in the province, high population centers have been able to absorb some of the workers and exhibit relative higher productivity in both goods and services. Efficiency indices by county can be used to guide tax sharing and expenditure responsibilities within provinces. JEL Classifications: R3, O1, F00 Keywords: Veracruz, Intra-regional Mexican Economy, INTRODUCTION The weak performance of the Mexican economy over the past 30 years as well as since independence continues to be an enigma given the great natural wealth and recent [...]

Based on two rounds of a nationally representative household survey, this paper presents an exploratory study of risk factors and the economics of the decision to smoke by adults in Russia in the second haft of the 1990s. With an overall smoking prevalence of 32.2%, smoking is much more prevalent among men (61.4%) than among women (10.3%). The risk of smoking is on the rise in Russia due mainly to the growing incidence of female smoking, especially in major urban centres, where the impact of modern culture and Western tobacco companies is more profound. The low estimated price elasticities of the decision to smoke for men (-0.085) and for women (-0.628) suggest that an excise tax on cigarettes is not an effective means to reduce the prevalence of smoking. The decision to smoke is also found to be very income inelastic. Formal education, occupation, alcohol consumption, and obesity are associated with smoking in a way similar to developed countries. Comparative Economic Studies (2003) 45, 87-103. doi:10.1057/palgrave.ces.8100001 Keywords: Russia, smoking, Russian health JEL Classifications: I1, P5, R2, INTRODUCTION According to the World Health Organization (WHO) (Lopez, 1997), smoking has become, or soon will be, the leading cause of death throughout the world and in Eastern Europe in [...]

Byline: Gregory J. Brock (1) Keywords: frontiers; inefficiency; Siberia Abstract: Using 1971--90 panel data from a Siberian province, two econometric methods are used side by side to examine technical inefficiency with a suggestion as to how the methods might be used in sequence. Estimates derived from a random effects method reveal that technical inefficiency is both substantial and not time invariant. Results using either a random or fixed effects method suggest that existing estimates of technical inefficiency in centrally planned economies may be biased downward because of the choice of the estimation method. Using either method, the increasing technical inefficiency found is likely to be one cause of the decline in the performance of centrally planned economies and their regions. Author Affiliation: (1) Program Economics Unit, USAID, Moscow, Russia Article History: Registration Date: 03/10/2004

Nation States and the Multinational Corporation Nathan M Jensen Princeton University Press: Princeton and Oxford, 2006, pp. 193. What can one say about cross-country foreign direct investment (FDI) using panel [...]

Copyright of Transformations in Business & Economics is the property of Vilnius University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The economic performance of Chechnya is examined for the first time using an aggregate stochastic frontier production function method. The 15 sectors of the economy are found to be quite inefficient in the use of capital and labour to produce aggregate output. Extensive growth is likely to continue though at a lower rate as federal subsidies from Moscow end. Intensive growth is unlikely given the lack of foreign investment and the authoritarian political system. Some evidence for the emergence of a market economy is found, suggesting that Kadyrov has overseen an economic transition. [ABSTRACT FROM AUTHOR]