AND THE LOW WAGE–LOW PRODUCTIVITY TRAP by

SSRN Electronic Journal, 2008

Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.

British Journal of Industrial Relations, 2010

2015

Die ZBW räumt Ihnen als Nutzerin/Nutzer das unentgeltliche, räumlich unbeschränkte und zeitlich auf die Dauer des Schutzrechts beschränkte einfache Recht ein, das ausgewählte Werk im Rahmen der unter

Weekly Report, 2005

British Journal of Industrial Relations, 2007

This paper argues that a high wage, high productivity economy cannot be created through the market mechanism but instead requires an industrial strategy. To trust the ‘natural’ properties of the market is to believe that economic growth is in some way a spontaneous process. Economic growth is not spontaneous but ‘artificial’ and has to be created and sustained by continuously improving the capacity of the economy to innovate and upgrade. Only in this way can a competitive advantage be gained and retained (Porter 1990:73/4). Thus, through deliberate policy decisions, the Japanese economy was moved into more sophisticated products and technologies, even whilst it still possessed a labour cost advantage upon which to compete. Such upgrading is certainly ‘unnatural’ (Porter 1990:76) and has to be created and sustained as a matter of deliberate policy buttressed by developmental institutions. This policy is thus formulated at government level and implemented through a range of quasi-public institutions. The fact that development is a matter of conscious policy exposes the flaw in the argument that deindustrialisation is a ‘natural’ process. It is more accurate to argue that an unfettered market mechanism possesses an inherent tendency to a low wage, low productivity economy that fails to upgrade and serves to block the necessary developmental strategy. This contains within itself a powerful tendency to deindustrialisation.

2015

2001

This Discussion Paper is issued within the framework of IZA’s research area 7KH:HOIDUH 6WDWH DQG /DERU 0DUNHWV Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent, nonprofit limited liability company (Gesellschaft mit beschränkter Haftung) supported by the Deutsche Post AG. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results ...

2011

Die ZBW räumt Ihnen als Nutzerin/Nutzer das unentgeltliche, räumlich unbeschränkte und zeitlich auf die Dauer des Schutzrechts beschränkte einfache Recht ein, das ausgewählte Werk im Rahmen der unter

Industry and Innovation, 1996

Despite intense study as an attractive model for adjustment to slower worldwide growth and increasing competition from low-wage producers, the sources of German institutional comparative advantage remain controversial, particularly with regard to the role of the national state. This paper argues that the national state plays a key -though mainly indirect --role in supporting the modernization of industry. On the one hand, the national regulation of labor markets has discouraged price competition and imposed a "productivity whip" on companies; on the other hand, through the supply of resources to sub-national and sectoral actors, the federal government has supported the investments in skills, R&D and capital equipment needed for industrial modernization. This support of an institutional infrastructure is particularly important for the large and modern SME sector (the Mittelstand). The 1990s illustrate both the continued success of this infrastructure in supporting adjustment and the ultimate dependency of these institutions on strong domestic political support and adequate international demand for high quality, medium-tech products.