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An Investigation of the Specification and Stability of the Australian Aggregate Wage Equation

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  • MICHAEL G. KIRBY

Abstract

Previous researchers of the Australian aggregate wage equation have chosen to use overlapping quarterly rates of change instead of the simple quarterly rates of change in heir empirical specification of this relationship. This paper argues that there is little intuitive or empirical evidence to support a continuation of this preference. The use of simple quarterly rates of change yields a well‐specified and stable empirical relationship, thus offering a viable alternative to the traditional approach. The estimation results provide further evidence or some of the Australian Phillips curve controversies.

Suggested Citation

  • Michael G. Kirby, 1981. "An Investigation of the Specification and Stability of the Australian Aggregate Wage Equation," The Economic Record, The Economic Society of Australia, vol. 57(1), pages 35-46, March.
    • Handle: RePEc:bla:ecorec:v:57:y:1981:i:1:p:35-46
    DOI: 10.1111/j.1475-4932.1981.tb01698.x
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    References listed on IDEAS

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    1. McDonald, John, 1977. "The Relationship between Wage Inflation and Excess Demand-New Estimates Using Optimal Extrapolative Wage Expectations," The Economic Record, The Economic Society of Australia, vol. 53(144), pages 490-507, December.
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    7. P. K. Trivedi & J. Rayner, 1978. "Wage Inertia and Comparison Effects in Australian Award Wage Determination, 1964‐74," The Economic Record, The Economic Society of Australia, vol. 54(2), pages 195-218, August.
    8. Salkever, David S., 1976. "The use of dummy variables to compute predictions, prediction errors, and confidence intervals," Journal of Econometrics, Elsevier, vol. 4(4), pages 393-397, November.
    9. McDonald, John, 1976. "Earnings and Award Wages in Australia: Some Econometric Considerations," Australian Economic Papers, Wiley Blackwell, vol. 15(27), pages 230-239, December.
    10. Trivedi, P K & Rayner, J, 1978. "Wage Inertia and Comparison Effects in Australian Award Wage Determination, 1964-74," The Economic Record, The Economic Society of Australia, vol. 54(146), pages 195-218, August.
    11. John Mcdonald, 1977. "The Relationship Between Wage Inflation and Excess Demand — New Estimates Using Optimal Extrapolative Wage Expectations," The Economic Record, The Economic Society of Australia, vol. 53(4), pages 490-507, December.
    12. S. W. Black & H. H. Kelejian, 1972. "The Formulation of the Dependent Variable in the Wage Equation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 39(1), pages 55-59.
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    14. Rao, B Bhaskara, 1977. "An Analysis of the Short and Long-run Trade-offs between Unemployment and Inflation and Estimates of the Equilibrium Steady State Unemployment Rate in Australia," Australian Economic Papers, Wiley Blackwell, vol. 16(29), pages 273-284, December.
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    Cited by:

    1. Guy Debelle & James Vickery, 1998. "Is the Phillips Curve A Curve? Some Evidence and Implications for Australia," The Economic Record, The Economic Society of Australia, vol. 74(227), pages 384-398, December.
    2. Elizabeth Webster & Yi‐Ping Tseng, 2002. "The Determinants of Relative Wage Change in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 35(1), pages 70-84, March.
    3. Gruen, David & Pagan, Adrian & Thompson, Christopher, 1999. "The Phillips curve in Australia," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 223-258, October.
    4. Philip E.T. Lewis & Michael G. Kirby, 1987. "The Impact of Incomes Policy on Aggregate Wage Determination in Australia," The Economic Record, The Economic Society of Australia, vol. 63(2), pages 156-161, June.
    5. Vines, David & Scheibe, Jörg, 2005. "A Phillips Curve for China," CEPR Discussion Papers 4957, C.E.P.R. Discussion Papers.
    6. Lenehan, A. J., 1996. "The macroeconomic effects of the postwar baby boom: Evidence from Australia," Journal of Macroeconomics, Elsevier, vol. 18(1), pages 155-169.

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