Wage Changes and the Frequency of Wage Settlements

The practical importance for public policy of the determinants of aggregate money wage changes has spawned an extensive empirical literature on this subject in the last decade or so. Since little of empirical significance seems to have been settled by this research, it is not surprising that it has been receiving substantial formal and informal criticism. On the one hand there has been criticism of the weak connection between economic theories and empirical analyses of the determinants of money wage inflation. On the other hand there is now a sizable body of criticism of the econometric methodology that has been used in most empirical studies and, as part of that literature, the purpose of this note is to examine the appropriate formulation of the rate of change of the aggregate money wage to be used as the dependent variable. In particular, we report the results of including explicitly in the estimation procedure the available information on the proportion of workers receiving wage adjustments in a given quarter. The advantage of this procedure is that it puts the basic estimating equations in a form where the various assertions about the error terms of these equations can be put to a test. Suppose that, in any given quarter of a year, we divide manual workers into two groups: those who receive adjustments to their wages in that quarter and those who do not. If we write At for the fraction of all workers who receive adjustments in a given quarter t, Wa for the hourly wage of those workers who receive wage adjustments, WI for the hourly wage of those workers who do not receive adjustments, and take the aggregate hourly wage Wt to be a geometric weighted average of Wa and Wn, then the approximate value of log Wt is

Criticism · Econometrics · Economics · Efficiency wage · Empirical research · Inflation (cosmology) · Labour economics · Quarter (Canadian coin) · Statistics · Wage · Economic theories and models · Economic Theory and Policy · Law · Mathematics · Monetary Policy and Economic Impact

• The Changing Nature of National Wage Agreements

  Open Access•William A Brown, William Brown et al.•Scottish Journal of Political…•1978

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