WAGE-LED GROWTH in MEXICO: A THRESHOLD REGRESSION ANALYSIS

Abstract

In this article we propose that the Mexican economic activity can be boosted when there are progressive wages in direct relation to labor productivity and targeted inflation rates. To this purpose, we apply threshold regressions to show that, after a certain threshold value, wages are not inflationary at all and that, if labor productivity increases, occupation or employment levels increase. Then, this leads to an enhancement in economic activities (controlling for other variables, namely: comparative unit costs of labor in the manufacturing industry, critical employment conditions —precariousness—, the equilibrium interbank interest rate and the real exchange rate index). This is shown for the Mexican economy with monthly data during the period 2007/01-2019/05.