Wages, Productivity and Human Capital in the European Union: Econometric Models and Comparison with the USA 1985-2005

14 Pages Posted: 24 Aug 2008

See all articles by Maria-Carmen Guisan

Maria-Carmen Guisan

University of Santiago de Compostela

E. Aguayo

Universidade de Santiago de Compostela

Date Written: August 23, 2008

Abstract

The European Union lags behind the United States both in rates of employment and real wages. This study analyzes the relationship between wages, productivity and human capital in 5 European Union countries: France, Germany, Italy, Spain and the United Kingdom, in comparison with the USA. Firstly we analyze the role of productivity in the explanation of real wages, secondly we present a comparative study of the evolution of wages and productivity during the period 1985-2005, and thirdly we estimate an econometric model which relates real wages with productivity and productivity with human capital. As measures of human capital we have included the average total years of schooling, based on Barro and Lee estimations and lagged Research expenditure per inhabitant. The main conclusion is that the European Union should develop economic policies in order to increase the support to human capital, fostering education and RD expenditure in order to achieve higher levels of real wages and higher rates of employment and to converge towards to the levels of the United States.

Keywords: Real wage models, Wages, Productivity and Human Capital, European Development, Comparison of EU countries and the USA

JEL Classification: C51,E61,J31,O51,O52

Suggested Citation

Guisan, Maria-Carmen and Aguayo, E., Wages, Productivity and Human Capital in the European Union: Econometric Models and Comparison with the USA 1985-2005 (August 23, 2008). Applied Econometrics and International Development, Vol. 7, No. 1, 2007, Available at SSRN: https://ssrn.com/abstract=1249202

Maria-Carmen Guisan (Contact Author)

University of Santiago de Compostela ( email )

Faculty of Economics and Business
Santiago de Compostela, A Coruña 15704
Spain

HOME PAGE: http://www.usc.es/economet/guisan.htm

E. Aguayo

Universidade de Santiago de Compostela

Complejo Docente - Campus Universitario de Lugo
Lugo, A Coruña 15704
Spain

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