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Explaining the Rising Wage-Productivity Gap of the 1980s: Effects of Declining Employment and Unionization

Economics Department, Grinnell College, Grinnell, Iowa 501 12

This paper investigates causes of the dramatic increase in the wage-productivity gap—the divergence between the growth rates of aggregate productivity and real wages - in the post-1981 period. Using a two-step estimation procedure which incorporates three-digit industry wage regression coefficients into an aggregate wage growth identity equation, it finds that employment decline within unionized industries explains 18% of the post-1981 increase in the gap and that declining union ability to raise wages may explain as much as another 25%. Imports, on the other hand, do not appear to explain the gap independently of employment effects.

Review of Radical Political Economics, Vol. 28, No. 2, 77-115 (1996)
DOI: 10.1177/048661349602800204


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