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Cambridge Journal of Economics Advance Access originally published online on May 3, 2005
Cambridge Journal of Economics 2005 29(4):659-664; doi:10.1093/cje/bei037
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Right arrow E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution
Right arrow J30 - General
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© The Author 2005. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Notes and Comments

The employment elasticity in manufacturing: a comment on Mazumdar

Jesus Felipe and Grace C. Sipin*

* Macroeconomics and Finance Research Division, Asian Development Bank, Philippines

Address for correspondence: Jesus Felipe, Macroeconomics and Finance Research Division, Economics and Research Department, Asian Development Bank, 6 ADB Avenue, Manila, Philippines; e-mail: jfelipe{at}adb.org.

We show that Mazumdar's recently proposed methods for estimating the elasticity of the wage bill with respect to output growth, and for decomposing the growth rate of the wage rate into an output effect, an employment effect, and a price effect, are problematic. The decomposition proposed is a tautology because it can be equally derived from an accounting identity. Likewise, we show that the alleged elasticity of the wage bill with respect to output growth has to take on a value of unity by definition.

Key Words: Accounting identity • Labour share

JEL classifications: N30, O15, J30, J41

Manuscript received December 8, 2003; final version received July 26, 2004.


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