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Wages in a Factor Proportions Model with Energy Input

Hyeongwoo Kim () and Henry Thompson ()

No auwp2012-05, Auburn Economics Working Paper Series from Department of Economics, Auburn University

Abstract: This paper examines US wage adjustment in a structural vector autoregression of the factor proportions model of production and trade with energy, capital, and labor inputs. Data cover the years 1949 to 2006. The wage adjusts to changes in inputs levels and output prices over 6 to 8 years. Energy has a more robust wage impact than capital. The wage reacts weakly if at all to the falling price of manufactures and rising price of services over the sample period. Estimates relate directly to factor proportions theory, suggesting robust substitution with labor in the middle of the factor intensity ranking.

Keywords: Wages; Energy; Factor Proportions Model; Vector Autoregression (search for similar items in EconPapers)
JEL-codes: F11 (search for similar items in EconPapers)
Date: 2012-07
New Economics Papers: this item is included in nep-ene and nep-lab
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