Productivity, Prices, and Factor Shares in Irish Manufacturing Industry 1953-70*

THE share of wages and salaries in the net output of manufacturing industry over the period 1953-70 is shown in Fig. 1. The upward trend of the earlier years was reversed after 1957, and the share declined fairly.steadily over the next decade. This decline has been described by Hughes [8], who suggests, "thatmost of the industry wage and salary share changed in the same direction as the industrial group wage and salary share", and so "changes in industry weights do not appear to have been a major cause of the decline . . .". Moreover, "cyclical influences . . . were not important determinants of the behaviour of the wage and salary shares of the industrial groups . . . " As Hughes notes, i t is interesting to inquire "to what extent has the decline been due to the increase in capital employed in Irish industry, which is generally believed to have taken place in the 1960s". In particular, it is worth investigating whether the facts are consistent with a rising capital labour ratio and an unchanged rate of profit on capital. This would be in accord with Salter's model [16] of a competitive industry in which productivity gains are passed on to consumers via falls in relative prices while the rate of profit remains unchanged. The paper is divided into two parts. In the first part, the relationships between labour productivity on the one hand, and costs on the other, are investigated. The analysis follows the approach of Salter's study of the U K economy, and broadly similar results are obtained, with some important exceptions.