The effect of wages and industry-specific variables on productivity of manufacturing industry in Malaysia

A dynamic heterogeneous panel evidence

Nurliyana Mohd Basri, Zulkefly Abdul Karim, Rahmah Ismail, Noorasiah Sulaiman

Research output: Contribution to journalArticle

Abstract

This paper examines the effect of real wages and industry-specific variables (training, IT, R & D) on labour productivity of 44 sub-manufacturing industries in Malaysia over the period of 2000-2015. Using a dynamic heterogeneous panel model namely Pooled Mean Group (PMG) and Mean Group (MG) estimators, the main result reveals that real wages has positive significant impact on labour productivity in the short and long-run. The latter is consistent with the efficiency wage theory which acclaims the idea that the increase in real wages may induce labour productivity in parallel. The industry-specific variables (training, IT, R & D) are also statistically significant in influencing labour productivity in the long-run but not in the short-run. These findings may provide some insights for policy makers in setting the appropriate level of wages for the manufacturing industry and in the implementation or evaluation of labour policies in Malaysia. Financial inducement and other relevant support from the government in training, IT and R & D may boost labour productivity in the manufacturing industry.

Original languageEnglish
Pages (from-to)379-391
Number of pages13
JournalInternational Journal of Economics and Management
Volume12
Issue number2
Publication statusPublished - 1 Jan 2018

Fingerprint

Heterogeneous dynamic panels
Productivity
Labour productivity
Malaysia
Manufacturing industries
Wages
Industry
Real wages
Short-run
Estimator
Politicians
Panel model
Labor policy
Government
Efficiency wages
Evaluation
Inducement

Keywords

  • Heterogeneous panel
  • Manufacturing industry
  • Pooled mean group
  • Productivity
  • Wages

ASJC Scopus subject areas

  • Business and International Management
  • Economics, Econometrics and Finance(all)
  • Strategy and Management

Cite this

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