The Effect of Average Wages on the Economy: The Case of the United States
Gerardo Angeles-Castro, Jonatan Juárez-Cruz, Miguel Flores-Ortega

Abstract
The paper applies vector autoregressive and error correction models, in order to explore the effect of average wages growth on economic growth, inflation and unemployment rate in the United States from the first quarter of 1964 to the first quarter of 2013. We find that average wage growth increases economic growth, reduces inflation and does not affect unemployment. Therefore, those policies oriented to boost wages can be convenient to strength the domestic market and the macro economy of countries, following the case of the US.

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