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Estimation of wage equations for New Zealand




This paper estimates wage equations for New Zealand based on pooled data from the Household Economic Survey (HES) from 2006/07 to 2010/11. Equations are estimated separately for couple men and women, single men and women and sole parents. The results are compared to previous New Zealand estimates using the HES from 1991 to 2001. We estimate wage equations and account for possible sample selection bias. Our estimates of the wage equations are largely comparable to the earlier estimates. We extend the equations to predict wage rates for workers and non-workers by drawing from the estimated wage distribution. We find that sample selection is significant for married men, single women and sole parents but not significant for married women and single men. Overall, we find that wage rates are positively related to age, education and experience but the wage rates are generally lower for non-Europeans and for people living outside Auckland.

Suggested Citation

  • Joseph Mercante & Penny Mok, 2014. "Estimation of wage equations for New Zealand," Treasury Working Paper Series 14/09, New Zealand Treasury.
  • Handle: RePEc:nzt:nztwps:14/09

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    References listed on IDEAS

    1. Guyonne Kalb & Rosanna Scutella, 2004. "Wage and employment rates in New Zealand from 1991 to 2001," New Zealand Economic Papers, Taylor & Francis Journals, vol. 38(1), pages 21-47.
    2. Geoff Lewis & Steven Stillman, 2007. "Regional economic performance in New Zealand: How does Auckland compare?," New Zealand Economic Papers, Taylor & Francis Journals, vol. 41(1), pages 29-68.
    3. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053, December.
    4. Robert Breunig & Joseph Mercante, 2010. "The Accuracy of Predicted Wages of the Non-Employed and Implications for Policy Simulations from Structural Labour Supply Models," The Economic Record, The Economic Society of Australia, vol. 86(272), pages 49-70, March.
    5. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    6. Dean Hyslop & Dave Maré, 2009. "Skill Upgrading in New Zealand, 1986-2001," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(4), pages 422-434.
    7. John Creedy & Alan S. Duncan, 2000. "Wage Functions for Demographic Groups in Australia," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 4(4), pages 296-316, December.
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    Cited by:

    1. John Creedy & Norman Gemmell & Nicolas Hérault & Penny Mok, 2018. "Microsimulation analysis of optimal income tax reforms. An application to New Zealand," Working Papers 468, ECINEQ, Society for the Study of Economic Inequality.
    2. Creedy, John & Mok, Penny, 2017. "Labour Supply Elasticities in New Zealand," Working Paper Series 6570, Victoria University of Wellington, Chair in Public Finance.
    3. John Creedy & Penny Mok, 2017. "Labour supply in New Zealand and the 2010 tax and transfer changes," New Zealand Economic Papers, Taylor & Francis Journals, vol. 51(1), pages 60-78, January.
    4. Penny Mok & Joseph Mercante, 2014. "Working for Families changes: The effect on labour supply in New Zealand," Treasury Working Paper Series 14/18, New Zealand Treasury.
    5. Joseph Mercante & Penny Mok, 2014. "Estimation of Labour Supply in New Zealand," Treasury Working Paper Series 14/08, New Zealand Treasury.
    6. Alinaghi, Nazila & Creedy, John & Gemmell, Norman, 2019. "The Redistributive Effects of a Minimum Wage Increase in New Zealand A Microsimulation Analysis," Working Paper Series 8023, Victoria University of Wellington, Chair in Public Finance.
    7. Nolan, Matt, 2018. "New Zealand Wage Equations: 1988-2013," Working Paper Series 7659, Victoria University of Wellington, Chair in Public Finance.

    More about this item


    wage rate; labour supply; selection bias; wage prediction;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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