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ARDL bounds test for cointegration: Replicating the Pesaran et al. (2001) results for the UK earnings equation using R

Author

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  • Kleanthis Natsiopoulos
  • Nickolaos G. Tzeremes

Abstract

This paper replicates the UK earnings equation using the autoregressive distributed lag (ARDL) modeling approach and the bounds test for cointegration by Pesaran et al. (Journal of Applied Econometrics, 2001, 16(3), 289–326). The findings from the narrow sense fully replicate the original results using the open‐source language R and the ARDL package. In the wide sense replication, augmented data are employed, thus extending the end period from 1997:Q4 to 2019:Q4, using an alternative measure for union power. Adopting the new dataset, this study reinvestigates the UK earnings equation, thereby providing supporting evidence of a long‐run relationship and reveals empirical findings about the long‐run effects of productivity, unemployment, tax wedge, and union power on wages.

Suggested Citation

  • Kleanthis Natsiopoulos & Nickolaos G. Tzeremes, 2022. "ARDL bounds test for cointegration: Replicating the Pesaran et al. (2001) results for the UK earnings equation using R," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(5), pages 1079-1090, August.
    • Handle: RePEc:wly:japmet:v:37:y:2022:i:5:p:1079-1090
    DOI: 10.1002/jae.2919
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    References listed on IDEAS

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    1. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    2. Jin Seo Cho & Matthew Greenwood‐Nimmo & Yongcheol Shin, 2023. "Recent developments of the autoregressive distributed lag modelling framework," Journal of Economic Surveys, Wiley Blackwell, vol. 37(1), pages 7-32, February.
    3. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    4. Hall, S G, 1986. "An Application of the Granger & Engle Two-Step Estimation Procedure to United Kingdom Aggregate Wage Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 229-239, August.
    5. Nickell, S J & Andrews, M, 1983. "Unions, Real Wages and Employment in Britain 1951-79," Oxford Economic Papers, Oxford University Press, vol. 35(0), pages 183-206, Supplemen.
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    Cited by:

    1. Cajas Guijarro, John, 2023. "An Extended Goodwin Model with Endogenous Technical Change: Theory and Simulation for the US Economy (1960-2019)," MPRA Paper 118878, University Library of Munich, Germany.

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