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Productivity-employment link and asymmetric adjustments: the case of Indonesia, Malaysia and Thailand

The theoretical link between employment and productivity can be bi-directional, and the effect of one on the other can be both positive and negative. Unemployment reduces productivity through reduction in spending on education and training, but improves productivity by removing the least productive...

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Main Author:	Abdullah Yusof, Selamah
Format:	Article
Language:	English
Published:	Research Science Press 2010
Subjects:	HB131 Methodology.Mathematical economics. Quantitative methods HD4801 Labor. Work. Working class
Online Access:	http://irep.iium.edu.my/3225/1/16-Selamah_Abdullah_Yusof%5B1%5D.pdf http://irep.iium.edu.my/3225/ http://www.serialspublications.com/journals1.asp?jid=513&jtype=
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spelling	my.iium.irep.32252011-12-01T06:44:23Z http://irep.iium.edu.my/3225/ Productivity-employment link and asymmetric adjustments: the case of Indonesia, Malaysia and Thailand Abdullah Yusof, Selamah HB131 Methodology.Mathematical economics. Quantitative methods HD4801 Labor. Work. Working class The theoretical link between employment and productivity can be bi-directional, and the effect of one on the other can be both positive and negative. Unemployment reduces productivity through reduction in spending on education and training, but improves productivity by removing the least productive firms from the economy. Meanwhile, an increase in productivity reduces the demand for labor as workers are more efficient, but leads to greater employment through an increase in production. This paper focuses on three south-east Asian countries, namely, Indonesia, Malaysia and Thailand to test the theory and applies cointegration and error correction models to determine the interactions between productivity and employment. It considers asymmetric adjustments since studies have shown that a long-run relationship may not be detected using cointegration analysis which assumes symmetric adjustments. The results indicate that no definite long term relationship can be established between employment and productivity for Indonesia and Thailand. However, a positive equilibrium relationship between productivity and employment is obtained for Malaysia. Both variables adjust to deviations from the long-run equilibrium value, but the way they adjust differs. Employment quickly adjusts to negative discrepancies, but is less readily to decrease. In contrast, productivity adjusts to positive discrepancies but displays persistence for negative discrepancies. Research Science Press 2010 Article REM application/pdf en http://irep.iium.edu.my/3225/1/16-Selamah_Abdullah_Yusof%5B1%5D.pdf Abdullah Yusof, Selamah (2010) Productivity-employment link and asymmetric adjustments: the case of Indonesia, Malaysia and Thailand. International Journal of Business Management, Economics and Information Technology, 2 (1). pp. 135-141. ISSN 0975-296X http://www.serialspublications.com/journals1.asp?jid=513&jtype=
institution	Universiti Islam Antarabangsa Malaysia
building	IIUM Library
collection	Institutional Repository
continent	Asia
country	Malaysia
content_provider	International Islamic University Malaysia
content_source	IIUM Repository (IREP)
url_provider	http://irep.iium.edu.my/
language	English
topic	HB131 Methodology.Mathematical economics. Quantitative methods HD4801 Labor. Work. Working class
spellingShingle	HB131 Methodology.Mathematical economics. Quantitative methods HD4801 Labor. Work. Working class Abdullah Yusof, Selamah Productivity-employment link and asymmetric adjustments: the case of Indonesia, Malaysia and Thailand
description	The theoretical link between employment and productivity can be bi-directional, and the effect of one on the other can be both positive and negative. Unemployment reduces productivity through reduction in spending on education and training, but improves productivity by removing the least productive firms from the economy. Meanwhile, an increase in productivity reduces the demand for labor as workers are more efficient, but leads to greater employment through an increase in production. This paper focuses on three south-east Asian countries, namely, Indonesia, Malaysia and Thailand to test the theory and applies cointegration and error correction models to determine the interactions between productivity and employment. It considers asymmetric adjustments since studies have shown that a long-run relationship may not be detected using cointegration analysis which assumes symmetric adjustments. The results indicate that no definite long term relationship can be established between employment and productivity for Indonesia and Thailand. However, a positive equilibrium relationship between productivity and employment is obtained for Malaysia. Both variables adjust to deviations from the long-run equilibrium value, but the way they adjust differs. Employment quickly adjusts to negative discrepancies, but is less readily to decrease. In contrast, productivity adjusts to positive discrepancies but displays persistence for negative discrepancies.
format	Article
author	Abdullah Yusof, Selamah
author_facet	Abdullah Yusof, Selamah
author_sort	Abdullah Yusof, Selamah
title	Productivity-employment link and asymmetric adjustments: the case of Indonesia, Malaysia and Thailand
title_short	Productivity-employment link and asymmetric adjustments: the case of Indonesia, Malaysia and Thailand
title_full	Productivity-employment link and asymmetric adjustments: the case of Indonesia, Malaysia and Thailand
title_fullStr	Productivity-employment link and asymmetric adjustments: the case of Indonesia, Malaysia and Thailand
title_full_unstemmed	Productivity-employment link and asymmetric adjustments: the case of Indonesia, Malaysia and Thailand
title_sort	productivity-employment link and asymmetric adjustments: the case of indonesia, malaysia and thailand
publisher	Research Science Press
publishDate	2010
url	http://irep.iium.edu.my/3225/1/16-Selamah_Abdullah_Yusof%5B1%5D.pdf http://irep.iium.edu.my/3225/ http://www.serialspublications.com/journals1.asp?jid=513&jtype=
_version_	1643605098536894464
score	13.211869

Productivity-employment link and asymmetric adjustments: the case of Indonesia, Malaysia and Thailand

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