Medium-run determinants of real wages in Australia

Lance A. Fisher; Geoffrey Kingston

doi:10.1016/j.eap.2022.09.002

Medium-run determinants of real wages in Australia

Lance A. Fisher, Geoffrey Kingston^*

^*Corresponding author for this work

Department of Economics

Research output: Contribution to journal › Article › peer-review

Abstract

We assess the medium-run effects of changes in the labour force, the capital stock and the terms of trade on real wages in Australia between 1978 and 2018. For this purpose, we estimate a simple two-sector specific-factors model. A rise of one percent in the labour force lowers wages by 1.4 percent, a rise of one percent in the capital stock lifts wages by 0.47 percent and a rise of one percent in the terms of trade lifts wages by 0.15 percent. Rapid growth in the labour force accounts for some of the stagnation of wages between 1984 and 1989, and slow growth in the capital stock accompanied the stagnation between 2013 and 2018. Declines in the terms of trade preceded both episodes.

Original language	English
Pages (from-to)	1098-1107
Number of pages	10
Journal	Economic Analysis and Policy
Volume	76
Early online date	10 Sept 2022
DOIs	https://doi.org/10.1016/j.eap.2022.09.002
Publication status	Published - Dec 2022

Keywords

Capital-intensive exports
Consumer wages
Specific-factors model
Stagnant wages
Value marginal product

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10.1016/j.eap.2022.09.002

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title = "Medium-run determinants of real wages in Australia",

abstract = "We assess the medium-run effects of changes in the labour force, the capital stock and the terms of trade on real wages in Australia between 1978 and 2018. For this purpose, we estimate a simple two-sector specific-factors model. A rise of one percent in the labour force lowers wages by 1.4 percent, a rise of one percent in the capital stock lifts wages by 0.47 percent and a rise of one percent in the terms of trade lifts wages by 0.15 percent. Rapid growth in the labour force accounts for some of the stagnation of wages between 1984 and 1989, and slow growth in the capital stock accompanied the stagnation between 2013 and 2018. Declines in the terms of trade preceded both episodes.",

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AB - We assess the medium-run effects of changes in the labour force, the capital stock and the terms of trade on real wages in Australia between 1978 and 2018. For this purpose, we estimate a simple two-sector specific-factors model. A rise of one percent in the labour force lowers wages by 1.4 percent, a rise of one percent in the capital stock lifts wages by 0.47 percent and a rise of one percent in the terms of trade lifts wages by 0.15 percent. Rapid growth in the labour force accounts for some of the stagnation of wages between 1984 and 1989, and slow growth in the capital stock accompanied the stagnation between 2013 and 2018. Declines in the terms of trade preceded both episodes.

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KW - Value marginal product

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Medium-run determinants of real wages in Australia

Abstract

Keywords

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