Wages and Productivity in Iran’s Manufacturing Industries With a Production Boom Strategy

In the economic literature, wage deviation from labor productivity causes economic inefficiency. However, evidence in Iran’s economy indicates a lack of coordination between wage changes and labor productivity, and the gap between the two variables has increased over time. Accordingly, the present study has two main approaches: first, study of the relationship between wages and labor productivity in the manufacturing industries of Iran’s provinces during the years 1392-1383 and evaluation of the impact of wage productivity (based on classical theories); second, examining the effectiveness of wage productivity (based on efficiency wage theories). Using the combined data and the generalized least squares method, the results show that both classical and wage theories are correct. In other words, while wages have a positive and significant effect on labor productivity, they also are affected by it. However, its impact factor is far greater than its susceptibility factor. Therefore, from the policy point of view, the results show the necessity of paying attention to wages in order to increase labor productivity in the manufacturing industries of Iran’s provinces.