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The Effect of Skill shortages on Unemployment and Real Wage Growth: A Simultaneous Equation Approach

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  • Wallis, Gavin

    (Office for National Statistics/University of Warwick)

Abstract

This paper attempts to quantify the effect of skill shortages on the UK labour market by developing a simultaneous equation model of unemployment and real wage growth. The model is developed following a structural approach based on a priori economic information and is initially estimated using a two-stage least squares procedure. The model is also estimated using Zellner's seemingly unrelated regressions estimation technique, with similar results. It is shown that skill shortages have a positive effect on real wage growth and a negative effect on unemployment, with both these effects economically and statistically significant.

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File URL: http://repec.org/res2003/Wallis.pdf
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Bibliographic Info

Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 217.

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Date of creation: 04 Jun 2003
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Handle: RePEc:ecj:ac2003:217

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Keywords: skill shortages; unemployment; wages; 2SLS;

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