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Fair Wage Policy and Construction Costs in British Columbia

Author

Listed:
  • Kevin Duncan

    (Hasan School of Business, The University of Colarado)

  • Peter Philips

    (Department of Economics, The University of Utah)

  • Mark J. Prus

    (Department of Economics, Suny, Cortland)

Abstract

The effect of the 1992 Fair Wage and Skill Development Policy on construction costs in British Columbia is estimated by an econometric model in which costs are a function of the project's physical characteristics, location, as well as the applicability of the fair wage policy standards. Construction projects funded by private companies and by the Province of British Columbia before and after the introduction of the policy provide the data which were collected from 1989 to 1995. Depending on the measure of construction cost and the model specification employed, the results indicate that while public construction projects are from 26 to 47 percent more expensive than privately funded projects, the fair wage policy did not significantly impact this cost differential. given the status of construction labor supply in British Columbia at the time, it is unlikely that input substitution can explain all of this result. Rather, it is more likely that the profit margin enjoyed by non-union construction companies absorbed much of the cost of this policy.

Suggested Citation

  • Kevin Duncan & Peter Philips & Mark J. Prus, 2001. "Fair Wage Policy and Construction Costs in British Columbia," Economics Discussion / Working Papers 01-11, The University of Western Australia, Department of Economics.
  • Handle: RePEc:uwa:wpaper:01-11
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    File URL: http://ecompapers.biz.uwa.edu.au/paper/PDF%20of%20Discussion%20Papers/2001/01-11.pdf
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    References listed on IDEAS

    as
    1. T. S. Breusch & A. R. Pagan, 1980. "The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 239-253.
    2. Kennedy, Peter E, 1981. "Estimation with Correctly Interpreted Dummy Variables in Semilogarithmic Equations [The Interpretation of Dummy Variables in Semilogarithmic Equations]," American Economic Review, American Economic Association, vol. 71(4), pages 801-801, September.
    3. D. N. Gujarati, 1967. "The Economics of the Davis-Bacon Act," The Journal of Business, University of Chicago Press, vol. 40, pages 303-303.
    4. Allen, Steven G, 1983. "Much Ado about Davis-Bacon: A Critical Review and New Evidence," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 707-736, October.
    5. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-1294, September.
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