Economics Dictionary of ArgumentsHome
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| Real wage: Real wage is the purchasing power of a worker’s income, adjusted for inflation. It reflects the quantity of goods and services a worker can buy with their earnings. Calculated as nominal wage divided by the price level, real wages determine living standards and labor market conditions, rising with productivity and falling with inflation. See also Wages, Inflation, Price level, Productivity._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Robert C. Feenstra on Real Wage - Dictionary of Arguments
Feenstra I 1-24 Real wage/Feenstra: (…) if the product prices change, how will the factor prices change? Feenstra I 1-26 (…) the wage increases by more than the price of good 1, (…) . This means that workers can afford to buy more of good 1 (w/p1 has gone up), as well as more of good 2 (w/p2 has gone up). When labor can buy more of both goods in this fashion, we say that the real wage has increased. Looking at the rental on capital (…) we see that the rental r changes by less than the price of good 2. It follows that capital-owner can afford less of good 2 (r/p2 has gone down), and also less of good 1 (r/p1 has gone down). Thus the real return to capital has fallen. We can summarize these results with the (…) Stolper-Samuelson (1941)(1) Theorem: An increase in the relative price of a good will increase the real return to the factor used intensively in that good, and reduce the real return to the other factor. >Stolper-Samuelson Theorem. Stolper, Wolfgang F. and Paul A. Samuelson, 1941, “Protection and Real Wages,” Review of Economic Studies, 9, 58-73._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Feenstra I Robert C. Feenstra Advanced International Trade University of California, Davis and National Bureau of Economic Research 2002 |
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