Abstract:
This paper applies the recently developed cointegration techniques to test for a
long-run equilibrium among real wages and the average productivity of labour
as implied by profit maximisation in the Greek manufacturing sector. We find
evidence for a profit-maximising equilibrium and for adjustment towards this
long-run equilibrium through nominal wages and labour productivity. We have
also provided an estimate of the elasticity of substitution of 0.23 which is consistent
with that of other studies using alternative approaches.
