Is There Any Linkage between Sectoral Capital-labour Ratios, Total Factor Productivity, and Wages?

Rath, Badri Narayan and Jangam, Bhushan Praveen (2020) Is There Any Linkage between Sectoral Capital-labour Ratios, Total Factor Productivity, and Wages? Emerging Markets Finance and Trade, 56 (15). pp. 3662-3677. ISSN 1540-496X

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Abstract

This paper investigates the relationship between sectoral capital-labor ratios, total factor productivity (TFP) and wages based on the contemporary Balassa-Samuelson model. To proceed, first, we identify a tradable and nontradable sector using an average of export to value added ratio for a group of developed and developing countries over the period 2001 to 2014. After accounting for cross-sectional dependence in the data, we find strong evidence that TFP of the tradable sector and wages significantly determines sectoral capital-labor ratios in both developed and developing countries. The long-run elasticities show that improvement in TFP declines the capital-labor ratios, whereas wages increase the capital-labor ratios in both tradable and nontradable sectors across developed and developing countries.

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IITH Creators:
IITH CreatorsORCiD
Rath, Badri Narayanhttp://orcid.org/0000-0001-7211-0952
Jangam, Bhushan PraveenUNSPECIFIED
Item Type: Article
Uncontrolled Keywords: capital-labor ratios; cross-sectional dependence; Total factor productivity; wages
Subjects: Social sciences
Divisions: Department of Liberal Arts
Depositing User: . LibTrainee 2021
Date Deposited: 08 Jul 2021 05:25
Last Modified: 08 Jul 2021 05:25
URI: http://raiith.iith.ac.in/id/eprint/8170
Publisher URL: http://doi.org/10.1080/1540496X.2020.1784140
OA policy: https://v2.sherpa.ac.uk/id/publication/8183
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