Simultaneous Equation Wage Determination in New Zealand

The wage determination hypotheses presented and tested in this paper were developed as two equations within a simultaneous equation model designed to explain and forecast for post-war New Zealand, the actual money wage rate, the minimum money wage rate, the retail price level, the demand for labour, the supply of labour, and the level of real output. The model is linear in the logarithms of the variables. Work on equations explaining the latter four variables is proceeding. In section two the hypotheses are formulated; in section three they are tested. Tests were conducted with both annual and semi-annual data, and for the annual data some two stage least squares (2SLS) estimates are presented and compared with the ordinary least squares (OLS) estimates