Medium-run determinants of real wages in Australia

Lance A. Fisher and Geoffrey Kingston

Economic Analysis and Policy, 2022, vol. 76, issue C, 1098-1107

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.

Keywords: Consumer wages; Stagnant wages; Value marginal product; Specific-factors model; Capital-intensive exports (search for similar items in EconPapers)
JEL-codes: E24 J31 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:76:y:2022:i:c:p:1098-1107

DOI: 10.1016/j.eap.2022.09.002

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