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

Author

Listed:
  • 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.

Suggested Citation

  • Wallis, Gavin, 2003. "The Effect of Skill shortages on Unemployment and Real Wage Growth: A Simultaneous Equation Approach," Royal Economic Society Annual Conference 2003 217, Royal Economic Society.
  • Handle: RePEc:ecj:ac2003:217
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    Cited by:

    1. Bamikole, Oluwafemi, 2013. "The Impact of Minimum Wage on Average Earnings in the Caribbean using Two-Selected Countries, Trinidad and Tobago and Jamaica (1980-2011 and 1997-2011)," MPRA Paper 57363, University Library of Munich, Germany.

    More about this item

    Keywords

    skill shortages; unemployment; wages; 2SLS;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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