Macroeconomic consequences of increased productivity in less developed economies

S Zahid; Sajid Anwar; A Valadkhani

doi:10.1016/j.econmod.2011.11.005

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Macroeconomic consequences of increased productivity in less developed economies

Journal article

Peer reviewed

Macroeconomic consequences of increased productivity in less developed economies

S Zahid, Sajid Anwar and A Valadkhani

Economic Modelling, Vol.29(3), pp.621-631

2012

DOI: https://doi.org/10.1016/j.econmod.2011.11.005

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Abstract

productivity

balance of payments

less developed countries

This paper examines the impact of improvements in productivity on prices, output, the real wage rate and the balance of payments. Within the context of the model used in this paper, an improvement in productivity can take two alternative forms: (1) a cost saving for a given output and (2) an increase in production without a direct decrease in employment. The results presented are based on a simple model of a small open economy that includes some key features of less developed economies. It is shown that, in the presence of monetary and fiscal restraints, an improvement in productivity leads to increases in output, employment and the real wage and the effect on the balance of payments, in the short and the medium runs, is also positive. We find that whether or not improvement in productivity is import saving plays a crucial role in both comparative static and simulation exercises.

Details

Title: Macroeconomic consequences of increased productivity in less developed economies
Authors: S Zahid (Author) - Lahore University of Management Sciences, Pakistan
Sajid Anwar (Author) - University of the Sunshine Coast - Faculty of Arts and Business
A Valadkhani (Author) - University of Wollongong
Publication details: Economic Modelling, Vol.29(3), pp.621-631
Publisher: Elsevier BV, North-Holland
Date published: 2012
DOI: 10.1016/j.econmod.2011.11.005
ISSN: 0264-9993
Organisation Unit: School of Business and Creative Industries; Indigenous and Transcultural Research Centre; University of the Sunshine Coast, Queensland; USC Business School - Legacy
Language: English
Record Identifier: 99449675602621
Output Type: Journal article

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