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A Macroeconomic perspective on skill shortages and the skill premium in New Zealand

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  • Razzak, Weshah
  • Timmins, Jason

Abstract

Qualification and occupation-based measures of skilled labour are constructed to explain the skill premium – the wage of skilled labour relative to unskilled labour in New Zealand. The data exhibit a more rapid growth in the supply of skilled labour than the skill premium, and a very large increase in the real minimum wage over the period from 1986 to 2005. We estimate the rate of increase in the relative demand for skills and the elasticity of substitution. The data are consistent with skill shortages and a skill-bias technical change. We examine the effects of the minimum wage, capital complementarity, and the exchange rate on the skill premium. We also test whether the demand for skills and the elasticity of substitution varied across industries and over time.

Suggested Citation

  • Razzak, Weshah & Timmins, Jason, 2007. "A Macroeconomic perspective on skill shortages and the skill premium in New Zealand," MPRA Paper 1886, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:1886
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    References listed on IDEAS

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    Cited by:

    1. Mok, Penny & Mason, Geoff & Stevens, Philip & Timmins, Jason, 2012. "A Good Worker is Hard to Find: Skills Shortages in New Zealand Firms," Occasional Papers 12/5, Ministry of Economic Development, New Zealand.
    2. Rossana Patron & Marcel Vaillant, 2012. "Can Education Policy Address The Wage Gap? A Note On Public Skill Formation In Developing Countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 24(3), pages 369-378, April.

    More about this item

    Keywords

    Skill-bias technical change; skill premium; the exchange rate;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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