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Causal Relationships in Australian Wage Inflation and Minimum Award Rates

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  • ALLAN FELS
  • TRAN VAN HOA

Abstract

When variables are correlated in time‐series studies, it is often difficult to determine which is cause and effect, and in what sense. This paper applies multivariate time‐series tests of causality to Australian wage, price, minimum wage award, labour demand and strike (working days lost) variables for 1953‐76. The results provide tentative support for a model in which strikes are exogenous:the size of Arbitration Commission awards is determined by strikes (suggesting that a trade union capture theory of Arbitration Commission regulation may apply):money wages are determined by minimum wage awards; and the demand for labour variable (measured in this paper by the ratio of actual to potential output) is determined (in a negative relationship) by money wages.

Suggested Citation

  • Allan Fels & Tran Van Hoa, 1981. "Causal Relationships in Australian Wage Inflation and Minimum Award Rates," The Economic Record, The Economic Society of Australia, vol. 57(1), pages 23-34, March.
    • Handle: RePEc:bla:ecorec:v:57:y:1981:i:1:p:23-34
    DOI: 10.1111/j.1475-4932.1981.tb01697.x
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    Cited by:

    1. Ernst A. Boehm & Vance L. Martin, 1989. "An Investigation into the Major Causes 01 Australia's Recent Inflation and Some Policy Implications," The Economic Record, The Economic Society of Australia, vol. 65(1), pages 1-15, March.
    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. Riveros, Luis A. & Paredes, Ricardo, 1988. "Measuring the impact of minimum wage policies on the economy," Policy Research Working Paper Series 101, The World Bank.
    4. E. A. Boehm, 1984. "Money Wages, Consumer Prices, and Causality in Australia," The Economic Record, The Economic Society of Australia, vol. 60(3), pages 236-251, September.

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