Wage Increases are no “Productivity Whip“: An Analysis of the East German Manufacturing Sector
In this paper the results of a microeconomic approach will be analysed. The study consists of the purposition that there could be an onesided relation between the increase in the wage rate and the time-laged increase of productivity. This is of special relevancy for a transforming economy like the east german one. The sample contains firm data of the east german manufacturing sector. The findings are that there is not such a presumed relation. Instead of this you can find a negative relation between changes in wage rate and productivity. This is only valid for a subgroup of firms with rising unit labor costs in the past. These firms deteriorate in contrast to the other firms.