Hyllebe g, S end; Paldam, Ma in
A icle
P ices and Wages in he OECD A ea 1913-1980
Zei sch i ü Wi scha s- und Sozialwissenscha en (ZWS) - Vie eljah essch i de
Gesellscha ü Wi scha s- und Sozialwissenscha en, Ve ein ü Socialpoli ik
P o ided in Coope a ion wi h:
Duncke & Humblo , Be lin
Sugges ed Ci a ion: Hyllebe g, S end; Paldam, Ma in (1985) : P ices and Wages in he OECD A ea
1913-1980, Zei sch i ü Wi scha s- und Sozialwissenscha en (ZWS) - Vie eljah essch i de
Gesellscha ü Wi scha s- und Sozialwissenscha en, Ve ein ü Socialpoli ik, ISSN 0342-1783,
Duncke & Humblo , Be lin, Vol. 105, Iss. 2-3, pp. 193-221,
h ps://doi.o g/10.3790/schm.105.2-3.193
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/291604
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P ices and Wages in he OECD A ea 1913 - 1980
A S udy o he Time Se ies E idence*
By S end Hyllebe g and Ma in Paldam
wi h he assis ance o Michael Poulsen
The domina ing ime se ies pa e ns o he yea ly a es o p ice and wage
in la ion in 17 de eloped wes e n economics om 1913 o 1980 a e in es i-
ga ed. On he basis o an economic model he co esponding uni a ia e ime
se ies (Final Equa ions) a e analyzed oge he wi h he socalled Au o eg es-
si e Final Fo m. In addi ion he lead-lag ela ions be ween wage and p ice
in la ion a e examined by use o es s o G ange non-causali y.
I. In oduc ion
This pape epo s on an a emp o ind he domina ing ime se ies
pa e ns o p ice and wage in la ion in 17 de eloped wes e n economies
du ing he las 68 yea s, and o in e p e hese pa e ns in economic
e ms. The se ies used a e:
p, pe cen ises in consume p ices.1
w, pe cen ises in nominal wage a es o wo ke s in manu ac u ing.2
Wage in la ion pw is ela ed o p ice in la ion p and o wage ises w
h ough he ollowing wo iden i ies — aken o be linea
(la) pw = w — g, whe e g is p oduc i i y g ow h
(lb) p = pw — lw, whe e lw is wage sha e changes.
* The au ho s g a e ully acknowledge assis ance om To ben M. Ande -
sen, Hans Jo gen Biede, Claus Nielsen, Ki s en S en o , and Ki s en 0s e -
gaa d. The pape has been p esen ed a ESEM 84 in Mad id and a he
Uni e si ies in Regensbu g, Munich, and U bana-Campaign and discussed
wi h se e al colleagues. The pape belongs o a se analysing p ice-wage
dynamics in a compa a i e se ing, and we shall ely on he indings in
o he pa s o he p ojec .
1 Fo he pe iod 1948/50 - 80 we use he implici consume p ice index in
he OECD Tables o Na ional Accoun s and be o e ha such consume p ice
indices as a e a ailable.
2 The wage se ies a e aken om he ILO-yea books, linked up wi h
na ional sou ces. No e ha he se ies a e o manu ac u ing only, so ha ,
s ic ly speaking, he lw in ela ion (2) should be o wo ke s in manu ac u -
ing only.
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194 S end Hyllebe g and Ma in Paldam
Table 1
The p and w se ies co e ed 1913 - 1980
Missing Main de ia ions om a e age pa e n
obse a ions as shown on Figu e 1
1 Aus alia^) noneb) VR, low 50 - 70, peaks in 51 and 73
2 Belgium b 20,30/47 High in la e 20s, s ange peak in mid 60s
3 Canada none VJR, low 50 - 73
4 Denma k none High ea ly 20s, peak 40, high mid 50s o 72
5 Ei e b 22 Low ill 60, 2-yea cycles in 60s,
high since 70
6 Finland b 15 Wild 15 - 21 and 40 - 52, R since 52
7 F ance none High 15-30 and 35 - 52, R since 52
8 Ge many») b 15,43/47c) Wild 15 - 25, 31/32, low since 70
9 Holland*) . . . none VR, some la ge luc ua ions in 50s
10 I aly b 14 R, bu wi h peaks 16/21, 29, 43/4, 74/77
11 Japan nonec) R, bu peaks 18/19 and 44/50
12 New Zealand .. none VR, bu low h oughou
13 No way none VR, bu high 17/20, low 22, 25/26
14 Os e eicha) ... b 19,34/47 R since 50
15 Sweden none VR, high 17/20 and low 22
16 UK none R, high 15,18, 40, 75 and low 21/22
17 USA none R, bu jumpy ill 50 and low since
Al oge he 2 = 1101 "VR" means ha Fig. 1 is " e y
ep esen a i e"
Missing is 4
8°/ob)
"R" means ha Fig. 1 is " ep esen a i e"
Sou ces el. Paldam and Madsen (1978) and Pede sen (1981). "bn" means ha da a
begins in n.
a) Ge many is GFR only om 46, The Ne he lands a e e med Holland and Aus ia
appea s as coun y 14, no o be mixed up wi h 1.
b) F om 1913 o 80 a e 68 yea s, hence he maximum a ailable would ha e been
17
•
68
—
1156 obse a ions.
c) In pos -wa uns we s a in 1950 o Ge many and Japan, u he i is no ed ha
he Japanese p se ies s a s in 23.
In Sec ion II we shall ake a look a he da a, as p esen ed in Table 1
and Figu e 1. I is a gued ha g is ai ly cons an implying ha we
may s udy wage in la ion in he di ec ly a ailable w se ies as well as in
he pw se ies. I , u he mo e, lw could be aken as cons an , p and w
a e he same excep o a cons an . In his si ua ion he ha e one a e o
in la ion on he wo ma ke s as is o en p esumed. Howe e , since lie is
no cons an he one- a e-p esump ion is a dubious one.
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13 Zei sch i ü Wi scha s- und Sozialwissenscha en 1985/2/3
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196 S end Hyllebe g and Ma in Paldam
The e o e he e a e good easons o analyse he dynamics o he p
se ies and he w se ies in isola ion. This is done in Sec ion IV. The nex
s ep is hen o analyse he pa e n o in e dependence be ween he wo
se ies, see Sec ion V.
Finally Sec ion VI gi es a b ie summa y o he main economic im-
plica ions o ou indings.
A as li e a u e discusses he economics o p ice and wage in la ion
and his li e a u e con ains many con o e sies. Some o hese conce n
he ela ionship be ween ou wo a iables and o he a iables, such
as he money s ock, no co e ed by he p esen pape . Bu we hope o
h ow ligh o e some o he emaining deba es. Sec ion III gi es
a b ie su ey o he mo e ele an heo e ical discussion poin ing ou
wha o look o in he ollowing sec ions.
II. A Look a he Time Se ies
The pa hs o ou p and w se ies in he a e age OECD coun y a e
displayed in Figu e 1. The wo cu es a e unweigh ed a e ages. In
Table 1 he co e age o he se ies analysed is lis ed and he main de ia-
ions om he pa e n o Figu e 1 a e men ioned. I appea s ha
Figu e 1 is e y ep esen a i e o he p ice-wage in la ion in each o
he coun ies. In o he wo ds: bo h p ice and wage ises con ain la ge
in e na ional elemen s; bu hey will no be ou conce n a he mo-
men .3
Fo ou pu pose he ollowing ou obse a ions a e he essen ial
ones:
( s 1) P ice ises p and wage ises w ha e a ai ly pa allel de elop-
men o e ime.
( s 2) The wo in la ion a es display la ge luc ua ions in he pe iod
conside ed.
( s 3) A lo o he ac ion in he se ies appea s in connec ion wi h spe-
ci ic -poli ical e en s.
( s 4) The e a e no clea long un ends o e he ull 68-yea span
co e ed — bu i is easy o ind sub-pe iods (co e ing one o
mo e decades) wi h s ong ends.
In iew o he impo ance o hese poin s hey a e wo h elabo a ing
a li le. To discuss ( s 1) we ha e o e u n o he wo iden i ies om
he in oduc ion:
3 See he e
Paldam
(1983
c)
and
Paldam
(1980) o a discussion.
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P ices and Wages in he OECD A ea 1913 - 1980 197
(la) w = w -g and (lb) pw = p + lw
Two o he o he pape s in ou p ojec analyse gw and lw on he da a
o he same coun ies and yea s:
In Paldam (1984 a) we analyse he ime se ies o he a e o unem-
ploymen u and he eal g ow h a e y. The ele an inding he e is
ha , excep o a couple o shi s, y comes ema kably close o being
whi e noise a ound coun y speci ic long- un g ow h a es.
Howe e , hese long- un g ow h a es a e a he cons an and hey
de ia e om g o wo easons: (dj di e en g ow h a es o he labou
o ce, {d2) he amoun by which echnical p og ess di e s om Ha od
neu ali y. The sum di + is likely o a y li le ela i e o he size
o he long- un g ow h a e and hence we conclude ha g may be aken
o be a he cons an . F om his ollows ha we may ake i o g an ed
ha pw and w a e essen ially he same se ies — so ha we can analyse
he dynamics o in la ion on he labou ma ke by analysing he w
se ies.
While, he e o e, (la) is unp oblema ic, (lb) is no . In Paldam (1979)
i is demons a ed ha wage sha es a e a om cons an . The a e age
alue o
|
lw
|
on annual da a comes o no less han 1.25 °/o (pe cen age
poin s o ne na ional income). Abou hal o ha is o a long un cha -
ac e — be ween 1949 and 1975 wages sha es ose by abou 20
%>
(o ne
na ional income), bu he es is o a sho un cha ac e . As he long-
un a e ages o ww and p a e a ound 4 -5 we know ha i is p ob-
lema ic o build on he one- a e p esump ion o in la ion:
( s 5) P ice and wage in la ion de ia e by an a e age amoun o 25 o
30°/o, whe e hal is a long- un de ia ion. When, ne e heless,
( s 1) holds his means ha he eed back mechanisms be ween p
and w ex end o e mo e han one yea . Also i s ongly sugges s
ha he e a e eed back e ec s be ween he in la ion a es a he
wo ma ke s.
One main pu pose o w i ing his pape is o analyse hese mecha-
nisms — hey will be he heme o Sec ion IV below.
F om Figu e 1 i is possible o a gue ha he e is a weak upwa d
end in he long un in la ion a es, bu his endency is dubious and
ce ainly i is dwa ed by la ge luc ua ions, so we shall s ick o he
o mula ion ( s4).
In he ime se ies adi ion he combina ion o endlessness and
la ge luc ua ions call o an analysis o he cyclical s uc u e o he
se ies. This, howe e , appea s less in e es ing o he economis when
13*
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198 S end Hyllebe g and Ma in Paldam
e e ence is made o he exogenous cha ac e o he "poli ical" e en s
gene a ing a g ea deal o he luc ua ions.4
Lo s o en e aining s o ies ha e been old abou he wild p ice-wage
luc ua ions ollowing Wo ld Wa I, and he al oge he di e en adjus -
men s a e Wo ld Wa II, whe e wild p ice-wage mo emen s only
occu ed in a ew coun ies — especially Japan, Ge many, I aly and
F ance. Then he e is he seemingly o ally unp edic ed Ko ean Wa
p ice explosion 1950/51 and he causally a he di e en p ice explo-
sion a e he Yom Kippu Wa o 1973 in ol ing he OPEC ca el and
la e he second oil p ice hike a e he I anian e olu ion.
In addi ion o hese "wo ld e en s" he e a e a numbe o coun y
speci ic his o ical e en s whe e some c ises occu ed ha had o be
accomoda ed by a ound (o some ounds) o in la ion. The mos ex eme
case being he Ge man in la ion o 1923/24, bu mos coun ies ha e
expe ienced mild cases — he ypical ones being like he F ench ones
o 1936 a e he ic o y o he F on Populai e. 1957/58 du ing he
Alge ian c isis whe e De Gaulle ook o e , and he "e en s" o May
1968. Many o hose e en s ha e included la ge scale labou un es , as
is e iden om Paldam and Pede sen (1984), and poli ical changes, so
he e a e many s o ies ha beg o be old, bu we shall, o he p esen ,
esis he emp a ion.
The la ge luc ua ions gene a ed by poli ical and o he exogenous
e en s — each ha ing i s own complex explana ion — sugges a highly
i egula cyclical s uc u e o he se ies. This, indeed, is wha we
ind, as we shall e u n o in Sec ion IV. When he cyclical
s uc u e becomes less in e es ing o s udy, he c ucial poin s ins ead
become: Fi s ly, he dynamic s uc u e o he p ocesses aking he
se ies in o such big swings once hey a e hi by an exogenous e en .
Secondly, he cen i ugal o ces le ing p ice wage mo emen s e u n
o he mode a e long un pa h. He e i is wo h emembe ing ha i is
no law o na u e ha in la ion has o come down once i goes up — in
se e al La in Ame ican coun ies in la ion a es ha e con inued o
se e al decades a ound 50 °/o pe yea . Also i is wo h no ing how la ge
he la es big in la ion wa e has been.
Ou main objec o s udy will be he i s o hese poin s — he s uc-
u e o au oco ela ion in he se ies and c oss co ela ion be ween he
se ies. We ha e a gued ha he e a e no long un ends in he se ies,
4 Digging one s ep deepe one may a gue ha he e a e economic ac o s
in ol ed causally in many o he poli ical e en s men ioned below. How-
e e , hey a e di e en economic e en s — o en o a long un na u e —
and hey a e p obably in mos cases only mino ac o s, so o any ealis ic
analy ical pu pose i is be e o cu he causal s uc u e he e.
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P ices and Wages in he OECD A ea 1913 - 1980 199
bu ob iously lo s o dynamics. To keep hings simple we will wo k
wi h subpe iods wi hou ends oo. We ha e chosen o conside he
ollowing h ee pe iods:
(P 1) The ull pe iod 1913/18 - 80. He e consis en se ies exis o 14
coun ies. The main p oblem is ha he 1918 - 21 luc ua ions a e
so wild and unique. Whe he o no hey a e included makes an
impac on some o he esul s.
(P 2) An ea ly pe iod 1923/24 - 54. He e he se ies exis o ( he same)
14 coun ies. The main p oblem is he pos Wo ld Wa II in la-
ions in a ew coun ies.
(P 3) A la e pe iod 1948/50 - 80, excluding he pos wa in la ions.
He e consis en se ies a e a ailable o all 17 coun ies.
The eade should no e ha (P 1) and (P 2) ha e some a ia ion in he
s a ing yea — he one used o each coun y is ound in Table 1.
Finally, he second poin — e.g. he o ces e u ning he in la ion
a es o hei long un a e ages: He e he e is li le doub ha he main
o ces a e associa ed o economic policy making. Go e nmen s and
( hei ) cen al banks clea ly wan in la ion o be s ic ly limi ed and so
do he popula ions.5 The e u ning pa e n, hence con ains endogenous
policy eac ions likely o appea as au oco ela ions in he esiduals.
The e o e, we ha e wo kinds o "policy" elemen s — he exogenous
ones p e iously discussed and he endogenous ones ha come o in lu-
ence he ime se ies p ocesses es ima ed.
III. The Theo ies — wha Pa e ns o Expec
The e is a huge li e a u e dealing wi h he mac o dynamics o p ice
and wage ises, see e.g. San ome o and Sea e (1978) and Chan-Lee
(1980) o su eys. Howe e , he e y ac ha new wo k keeps pou -
ing ou poin s o he lack o basic ag eemen in he ield. We shall no
a emp o p o ide ano he su ey o he li e a u e, bu only d aw a
ew main lines. A main no ion is he one dis inguishing be ween he
ollowing h ee ypes o e ms in p ice-wage models:
Pull- e ms, II. They a e no mally aken o be unc ions o unemploy-
men {u) and ela ed e ms (...). A he goods ma ke he basic o mu-
la ion is he "nai e" Keynesian wo gap model, and he analogous o -
mula ion a he labou ma ke is he "simple" Phillips cu e.
s The is a la ge li e a u e on he ela ion be ween he changes in eco-
nomic condi ions and changes in he popula i y o go e nmen . The mos
ele an a icle pe haps is Hibbs (1979) and he summa y in Paldam (1983 b).
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200 S end Hyllebe g and Ma in Paldam
Push- e ms,
xp.
He e wo schools exis . In one school he main eason,
why people push, is ha hey expec in la ion — i.e. we he e use ex-
pec ed in la ion pe as he a gumen . The o he school ies o iden i y
ac ual push a iables. I has come up wi h a la ge bag o mixed ad hoc
a iables o which some a e uly exogenous, while mos may be caus-
ally ela ed o he pe a iable. On he goods ma ke we may use impo
p ices (PM), he deg ee o monopoly, e c. On he labou ma ke we may
use some exp ession o he powe o ade unions, o he labou ma -
ke clima e (such as he numbe o indus ial con lic , cn) o o policy
in luences on he push. The la e being e.g. ax a es, , he deg ee o
compensa ion in unemploymen elie paymen s, a ious incomes policy
p oxies e c.
C oss- e ms, R. When keeping ack o bo h he goods and he labou
ma ke , we need o model how he a e o in la ion a he wo ma ke s
in luence each o he .6
Hence, by p esuming he e ms o be addi i e, we ha e as ou basic
' ame* he ollowing model:
(2a) P = (u, ...) + yjp (pe, pM, ...) + Rp (w, w_l9 ...,) + bx
(2b) w = I1w(m, ...) + xpw
(PE
cn, , ...) + Rw (p, P_i, . • 0 + e2
(2c) w = p + g + lw
The model in (2) is ob iously a nas y one o wo k wi h: I is simul-
aneous, almos symme ical, so ha ce ain e ec s a e likely o be
e y ha d o asc ibe o he igh equa ion, and inally i con ains a ia-
bles (such as p, w and pe) ha a e likely o be e y collinea . In sho ,
(2) is an inope a i e model o applied wo k.
Howe e , (2) does con ain a numbe o o en discussed issues. As (2)
is simul aneous one immedia ely asks o he educed o m. By line-
a iza ion o he c oss e ms:
(3) 3 Rjd p =
<x
and 3 Rp/3 w = 0
one ob ains he ollowing educed o m:
(4a) p = 0 unp + pnw) + + aoi +*i'
(4b) w = y0 [(IIW +
<xllp)
+
{y>w
+
oapp)]
+ ,
whe e yo = 1/(1 —
<x
).
6 Many e minologies a e in use in hese ma e s, and he eade should
no e ou s, especially since we dis inguish be ween push- e ms and c oss-
e ms ha a e me ged by mos w i e s. No e ha wage indexa ion is con-
ained in he i?^- e m.
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P ices and Wages in he OECD A ea 1913 - 1980 207
The e is, howe e , ano he mixed possibili y ha on he ace o i
appea s a he easonable. We shall e m i he mild RE case.9 In his
case he in o ma ion I en e ing in o eq. (6) depends on he e o s made in
da a collec ion and analysis — o in o he wo ds on he a en ion gi en
o expec a ion o ma ion. Tha a en ion is likely o change o e ime.
Pe haps, unde "no mal" condi ions people do no ca e much, and we
obse e ha he smiple LIRE-pa e n modelled in (13) comes o dom-
ina e, bu hen om ime o ime e en s (o ansi o y cha ac e pe -
haps) occu making people ca e abou in la ion so ha he HIRE-pa -
e n eme ges. This we should obse e in he o m o a disin eg a ion o
he nice and simple pa e n (8). In such a mild RE wo ld i is impo an
o no e how o en b eakdowns o such pa e ns occu , and also i is
c ucial o lea n o iden i y he ypes o e en s making he HIRE in-
s abili y u n up.
Abo e i was sugges ed ha he dynamics may in ol e mo e a iables
han pe — in Paldam (1983 a) i is demons a ed ha he numbe o in-
dus ial con lic s has links o wage in la ion bo h ways and wi h lags,
and mo e a iables may e y well en e in o he complex dynamics o
in la ion. The e o e he e a e no need o iden i y he dynamics o he
wo in la ion a iables wi h in la iona y expec a ions as we ha e done
in he de i a ion abo e.10 In ac Paldam (1984 b) is an a emp o p e-
sen a dynamic heo y o p ice-wage in la ion wi hou expec a ions, bu
whe e he dynamics is ca ied by wage s uc u e shi s in ol ing in-
dus ial con lic s.
IV. The Uni a ia e Time Se ies S uc u e
o P ice and Wage Ba es Changes: The Final Equa ions
and he Au o eg essi e Final Fo m
In Sec ion III i was a gued ha he Final Equa ions o p and w a e
ARMA (R, S) p ocesses wi h iden ical au o eg essi e pa s. Fu he mo e,
i he unemploymen se ies a e AR (1) p ocesses, which seems o be he
domina ing ea u e o he applied da a se , he o de becomes!? = 2 = S.
To in es iga e hese indings, uni a ia e ime se ies models a e o mu-
9 O cou se, he RE-school is mos ly known o explo ing he ex em
HIRE-case, whe e he new and s iking esul s ha e eme ged, o en o a
coun e -in ui i e o pa adoxial cha ac e , such as he ine iciency esul s
o economic policies. Bu , on he o he hand, wha mos p oponen s o RE
eally seem o ha e in mind, as hei ealis ic e sion o he RE-idea would
seem o be ou mild RE-case.
The pe- a iable is a measu able a iable wi h a s anda d polling ech-
nique. F om he a emp s made i appea dubious ha his a iable is
ac ually able o ca y he whole o he dynamics o in la ion as i does in
ou o mula ion ollowing s anda d heo y, see, e. g., She in (1982) o a
su ey o he e idence.
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208 S end Hyllebe g
and
Ma in Paldam
o
2
&
co
o
5.57 [.04]
8.24 [.17]
3.53 [.00]
5.58
[.04]
12.06
[.48]
3.39 [.00]
9.13 [.24]
12.42
[.51]
3.48 [.00]
17.51 [.82]
3.28 [.00]
6.76 [.09]
13.46
[.59]
5.21 [.03]
6.30 [.07]
5.59
[.04]
4.59 [.02]
<
o
3.357
2.162
1.929
1.919
3.074
6.535
3.068
1.280
2.199
3.219
3.515
2.530
2.921
1.452
2.860
2.984
1.557
eg
<
o
.286
.233
.281
.221
.170
.231
.200
.292
.190
.205
.354
.199
.249
.144
.357
.315
.248
.246
(.061)
ca
- .066
- 1.007
- .723
- 1.102
- 1.107
1.176
- .912
.645
- 1.224
- 1.087
.058
- 1.106
- .6132
1.509
- .864
- 1.074
- .849
- .491
(.855)
»H
< o
.592
.234
.356
.182
.143
.429
.381
.299
.193
.208
.386
.223
.263
.315
.213
.226
.195
.285
(.114)
<®
MO O^ ^ OC-OCOOM
© -H CO o o
Hi jcoo^cooo^inc-
* ih © © o> co
N<*<ocoeMcou30)CMcoiA
n in in w
1
1 1 1 1 1 1 II 1 1 1 1 1 1
- .302
(.429)
CM
•9.
< >
.394
.354
.079
.322
.258
.116
.260
.103
.230
.252
.173
.229
.303
.018
.400
.382
.235
.242
(.114)
CM
- .346
.463
- .106
.529
.491
- .898
.442
- .146
.491
.553
.185
.555
- .295
- .355
.510
.485
.491
.179
(.446)
iH
<
o
.557
.257
.260
.255
.222
.235
.422
.224
.199
.240
.325
.238
.289
.026
.219
.243
.131
in
CM
in
IH
CM
1H
1.105
.492
1.192
.544
.551
.819
.534
.058
.509
.643
.140
.602
1.218
.472
.544
.665
.595
.628
(.314)
<
o
1.507
.277
.659
.364
.400
2.130
1.527
1.126
.824
.270
2.978
1.055
.495
.654
.963
1.148
.288
.980
(.734)
<
1.383
.778
- .085
.058
.727
7.412
.239
3.247
.122
- .171
3.861
- .093
.683
3.445
.194
- .553
.090
1.255
(2.084)
Coun y
1.
Aus alia
2.
Belgium
3.
Canada
4.
Danma k
5.
Ei e
6.
Finland
7.
F ance
8.
Ge many
9.
Holland
10.
I aly
11.
Japan
12. New
Zealand
13.
No way
14.
Ös e eich
15.
Sweden
16. UK
17. USA
A e age
(S anda d
e o )
u
"H
S
^
U
-M
S ^
OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/
DOI h ps://doi.o g/10.3790/schm.105.2-3.193 | Gene a ed on 2023-04-04 12:06:25
P ices
and
Wages
in he
OECD
A ea
1913
-
1980
209
a
co
u
h
C9
C/
2.82 [.00]
12.56 [.52]
7.24
[.11]
8.91 [.22]
15.91 [.75]
9.13 [.24]
3.45 [.00]
12.44
[.51]
7.84 [.15]
12.71 [.53]
2.89 .[00]
7.15
[.11]
6.53 [.08]
7.36 [.12]
6.92 [.09]
8.26 [.17]
8.42
[.18]
< >
5.323
3.923
2.507
2.532
3.944
5.859
4.027
2.121
3.970
4.075
4.248
4.172
3.394
2.385
3.493
3.057
1.320
<N
©
< O
.149
.157
.312
.373
.702
.290
.068
.408
.326
.165
.276
.677
.208
.222
.169
.152
.249
.288
(.175)
«D
-
1.096
-
1.190
- .321
-
1.018
- .692
.651
-
1.179
.654
- .898
-
1.256
- .065
- .843
-
1.053
.373
- .991
-
1.122
- .015
- .592
(.667)
iH
<D
<ö
.255
.176
.537
.324
.341
.363
.171
.377
.314
.197
.283
.509
.175
.225
.121
.195
.321
5
S
C*
H
«î>
-
.445
-
.309
-
.136
-
.564
-
.824
-
.378
-
.309
.644
-
.531
-
.286
.666
.584
-
.355
.456
-
.280
-
.481
- .191
-
.230
(.425)
M
<
o
.251
.209
.334
.358
.518
.216
.193
.226
.356
.209
.195
.691
.444
.101
.258
.283
.245
2
eo
a»
<4«
CSI
»H
M
.396
.528
-
.221
.490
.529
-
.773
.493
.019
.409
.525
.181
.501
.436
-
.246
.018
.512
.271
.239
(.370)
iH
<
Ö
.292
.197
.531
.299
.426
.301
.250
.307
.308
.181
.195
.586
.310
.100
.239
.228
.265
I
n
s
•H
<»9
.552
.528
1.103
.493
.547
.702
.505
.265
.421
.561
.208
.527
.499
.245
.670
.520
.664
.530
(.204)
<<T
1.307
.398
1.640
.767
1.172
4.105
1.908
4.283
.643
.445
3.327
1.111
1.390
1.550
1.572
.957
.792
1.610
(1.187)
<3.
.229
.466
.891
.442
-
.177
11.422
.531
5.752
2.432
.500
6.486
.008
1.402
8.435
3.399
.480
.482
2.450
(3.435)
Coun y
1.
Aus alia
2.
Belgium
3.
Canada
4.
Danma k
5.
Ei e
6.
Finland
7.
F ance
8.
Ge many
9.
Holland
10.
I aly
11.
Japan
12.
New
Zealand
13.
No way
14.
Ös e eich
15.
Sweden
16.
UK
17.
USA
A e age
(S anda d
e o )
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210 S end Hyllebe g and Ma in Paldam
C-J
©
1.139
(3.821)
.146
(.095)
.303
(.294)
.280
(.090)
.246
(.061)
.288
(.175)
CM
- .600
(.297)
- .648
(.334)
- .973
(.123)
- .826
(.188)
- .491
(.855)
- .592
(.667)
®
< o
1.288
(3.646)
.161
(.062)
.322
(.286)
.257
(.063)
.285
(.114)
.287
(.117)
<®
- .250
(.378)
- .438
(.214)
- .493
(.106)
- .580
(.112)
- .302
(.429)
- .230
(.425)
•M
1.213
(3.645)
.196
(.058)
.300
(.290)
.252
(.123)
.242
(.114)
.299
(.143)
CM
.124
(.383)
.083
(.326)
.211
(.299)
.171
(.298)
.179
(.446)
.239
(.370)
< C>
1.307
(3.663)
.196
(.039)
.338
(.274)
.289
(.087)
.255
(.112)
.295
(.122)
<eT
.802
(.421)
.884
(.298)
.725
(.286)
.743
(.242)
.628
(.314)
.530
(.204)
<
2.050
(3.996)
.500
(.267)
.652
(.480)
.608
(.458)
.980
(.734)
1.610
(1.187)
.883
(1.335)
.826
(.818)
.312
(.627)
.563
(.843)
1.255
(2.084)
2.450
(3.435)
Se ies
•a • A .3 •a . 5
Pe iod
1913/19
- 1980
1922/23
- 1954
1948/50
- 1980
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P ices and Wages in he OECD A ea 1913 - 1980 211
la ed and es ima ed based on he well-known p ocedu e o Box and
Jenkins (1970). The ime se ies models a e cons uc ed o all coun ies
a ailable in he sample o each o he o e lapping ime pe iods PI:
1913/19 - 1980, P2: 1922/23 - 1954, and P3: 1948/50 - 1980.
In o mula ing he ime se ies models, i.e., socalled au o eg essi e
mo ing a e age o ARMA models, he usual ools a e applied, i.e. he
au oco ela ion unc ion and he pa ial au oco ela ion unc ion. In
addi ion he es ima ed spec a a e used in o de o in es iga e he pos-
sibili y o applying an unobse ed componen s model o he ime
se ies models. The unobse ed componen s model whe e he se ies is
assumed o con ain wo o mo e addi i e unobse ed componen s, o en
deno ed he end, he cycle, and he i egula componen , each ha ing
an ARMA ep esen a ion may be seen as a pa simonious o mula ion o
an o dina y ARMA model, see Hyllebe g (1984) o a de ailed discussion.
The main esul s ob ained in he o mula ion s age a e
(CI) he au oco ela ion unc ions and he pa ial au oco ela ion
unc ions a e e y simila o he wo se ies w and p o each
coun y.
(C2) he gene al pic u e o he au oco ela ion unc ions o he di -
e en coun ies is one whe e he au oco ela ions die ou
smoo hly. The pa ial au oco ela ion unc ions ha e la ge signi -
ican peaks a lag 1 and in some cases lag 2 only, see Figu es 2a
o 2c, whe e he a e age esul s a e shown.
This implies ha he i s model o es ima e is an AR (1) p ocess, bu
a ho ough diagnos ic analysis o he esiduals indica es ha his model
doesn' p oduce a sa is ac o y desc ip ion o nei he he wage no he
p ice se ies. Highe o de ARMA p ocesses a e hen es ima ed and he
gene al esul s show ha he ARMA (2,2) p ocess is second o none
al hough i by no means p oduces an excellen desc ip ion o all
coun ies. In addi ion he pa ame e s a y ac oss coun ies especially
o he p ice se ies while he AR pa s a e no as simila o bo h se ies
w and -p o he indi idual coun y as could be expec ed om he
heo e ical esul s. Howe e , he a e age AR coe icien a e qui e
simila . The esul s o he pe iod 1948 - 1980 a e shown in Tables 2a
and 2b, while he a e age esul s a e p esen ed in Table 2c.
In Sec ion III i was also a gued ha i he unemploymen a e is
conside ed exogenous — a eckless assump ion o cou se — he Au o-
eg essi e Final Fo m o he model desc ibed ea lie consis s o wo
equa ions whe e p* and w a e explained by he unemploymen a e
unlagged and lagged one pe iod and p -1 and w -1 espec i ely, while
14 Zei sch i ü Wi scha s- und Sozialwissenscha en 1985/2/3
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212 S end Hyllebe g
and
Ma in Paldam
©
00
Oi
»Ö
e
'C
o
a
u
o
m
o
s
S
e
a
I
<2>
+
+
H
I
¿
+
¿
o
+
<u
O
o
a
u
h
TH
S
.15
[.30]
3.85
[.95]
5.08
[.98]
4.58
[.97]
2.46
[.88]
3.53
[.94]
.72
[.60]
«
2.77
2.58
4.17
4.56
10.09
3.32
2.37
©
<
o
.157
.173
.204
.181
.279
.177
.132
.186
(.047)
.401
.401
.050
-
.485
.111
-
.200
.611
.127
(.381)
< o
.132
.164
.156
.099
.255
.097
.146
.150
(.053)
.625
.515
.653
.920
.418
.882
.444
.637
(.200)
»H
<
o
.357
.186
.549
.488
1.967
.346
.161
.579
(.628)
»H
.881
.198
-
.913
-
.310
.530
.741
.517
.235
(.640)
O
«Q.
.350
.182
.539
.481
1.810
.348
.160
.553
(.572)
©
-
1.073
- .393
.946
.465
-
2.004
- .754
- .627
- .491
(.975)
N.
<
o
1.218
1.244
1.608
1.045
4.659
.860
1.145
1.683
(1.332)
<
2.633
2.263
1.502
-
.393
8.510
.873
2.392
2.325
(2.979)
Coun y
1.
Aus alia
3.
Canada
4.
Denma k
5.
Ei e
6.
Finland
16.
UK
17.
USA
A e age
(S anda d
e o )
£
u
V»
o
a
S
»
(0
(0
o
H
u
V
•i-l
S
1
<1)
U)
i
u
.
S?*?
TO
00
a)w
Ä
W)
0)
W ,Q
""S
«
c
OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/
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P ices and Wages in he OECD A ea 1913
-
1980 213
CO
M
Ci
iH
Ȇ
o
•e
«
A
Til
«
o
ci
£
a
»M
!
.s
o
>
UD
»
o
<
pd
©
I
+
o*
+
•a
+
I
+
O
+
H
»ö
o
%
¿J
J
^
C
<D
I
°
.1
s
I
P-4
C3
l
.2
•N
»d
§
cn
•S2
S
e
o
(4
(H
a
i-
S
1.24
[ .73J
1.23
[ .73]
24.50
[1.00]
.00
[ .04]
1.27
[ .74]
.78
[ .62]
8.35
[ .99]
w
<o
5.23
2.22
3.51
4.15
11.26
4.71
3.34
©
<
o
.248
.125
.180
.132
.259
.170
.138
.179
(.055)
.177
.616
-
.400
-
.670
-
.681
-
.644
.589
-
.153
(.586)
«H
«
Ö
.210
.120
.097
.041
.179
.093
.137
.125
(.057)
< Ü
.506
.578
.846
.968
.906
.957
.123
.698
(.313)
<
o
.590
.155
.454
.342
1.715
.336
.280
.553
(.534)
.961
.595
.063
.248
2.751
.652
1.175
.921
(.893)
o
c x
<
o
.582
.146
.420
.355
1.481
.339
.225
.507
(.451)
o
-
1.332
- .737
- .356
- .315
-
2.871
- .634
-
1.255
-
1.071
(.888)
< o
2.352
1.342
1.451
1.809
4.005
.985
1.482
1.918
(1.014)
<
4.940
3.499
2.463
0.991
1.711
.482
4.809
2.699
(1.778)
Coun y
1.
Aus alia
3.
Canada
4.
Denma k
5.
Ei e
6.
Finland
16.
UK
17.
USA
A e age
(S anda d
e o )
ûj
3
(4
H
14*
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214 S end Hyllebe g and Ma in Paldam
Table 3 c
Es ima es o
o ,
X and i ob ained om Tables 3 a and 3 b
Coun y Equa ion a =
io -
il' io
= («! - !)/(
1
- Ì)
1.
Aus alia P - 1.073 .821 - 1.095
- 1.332 .721 - .771
3.
Canada i - .393 .504 .022
•
w - .737 .807 - 1.187
4.
Denma k P .946 .965 - 8.914
w « - .356 .177 .813
5.
Ei e P .465 .667 .760
- .315 .787 .849
6.
Finland P - 2.004 .264 .209
™ - 2.871 .958 - 1.238
16.
UK P - .754 .983 - 5.941
w - .634 1.028 2.536
17.
USA P - .627 .825 - 2.177
™ - 1.225 .936 - 12.703
A e age P
™
- .491
(.975)
- 1.071
(.888)
.718
(.260)
.773
(.284)
- 2.248
(3.637)
- 1.672
(5.052)
he e o p ocesses a e i s o de mo ing a e age p ocesses. The au o-
eg essi e pa s o he wo equa ions a e iden ical he e as well, as a e
he coe icien s o he unemploymen se ies. The esul s o a condi ional
maximum likelihood es ima ion o he pa ame e s applying he Gauss-
New on algo i hm, see Hyllebe g (1984), a e shown in Tables 3a and 3b,
o only 7 coun ies. Fo he eigh h coun y, Sweden, he maximum
likelihood algo i hm doesn' con e ge while he unemploymen se ies
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P ices and Wages in he OECD A ea 1913 - 1980 215
a e p esen ly una ailable o he emaining coun ies, a leas o he
whole pe iod.
Again he esul s a e somewha mixed, as he coe icien s o he lag-
ged dependen a iables, i.e. p -i and W -i a e e y simila on a e age
a leas while he coe icien s o he unemploymen se ies a e no . Fo
he p ice equa ion some o he es ima es also exhibi 'w ong' signs
al hough no signi ican ly so.
F om (11a) and (lib) i is seen ha he es ima es o oc and I may be
ound as and
—
/?i/A) espec i ely and an es ima e o is ound as
(A)
&i
+ h)/(A) + Pi) = (c%i - £)/( 1 - A). While he es ima es o he ad-
jus men pa ame e 1 look easonable he es ima es o /? a e implausible.
Howe e , i is wo h emembe ing ha he a iance on hese es ima es
a e e y high due o he o m o he o mula +
/?i)
/ + /?i) = ¡3.
In concluding his sec ion i mus be admi ed ha he ' heo ies' pu
o wa d in sec ion II a e only pa ly suppo ed by he esul s, and ha
mo e analysis is equi ed be o e any conclusion is d awn.
V. The In e dependence o P ice and Wage Rises
In o de o h ow some u he ligh on he ques ions al eady add es-
sed in Sec ion IV a co ela ion analysis o he lead-lag s uc u e o he
se ies p and w is unde aken.
The co ela ion analysis consis s o he calcula ion o he ollowing 7
co ela ions o ou (14 + 14 + 17 =) 45 coun ies and 3 pe iods:
(14) T =
(w, pT),
G
[- 3, - 2, -
1,
0, + 1, + 2, + 3] .
I.e. _2 is he co ela ion be ween he i -se ies and he p-se ies lagged
2 yea s e c.
I iden ical uni a ia e ime se ies gene a e w and p he co elog am
T should be symme ical a ound = 0 and all om he axis as he
co esponding au oco ela ion unc ions on igu es 2a - . F om Figu e
3a - c i is ob ious ha he co elog ams a e no symme ical and hey
indica e ha w leads ]p in he pe iods 1913 - 1980 and 1922 -1954 bu
no in 1948 - 1980.
To u he in es iga e his poin o mal es s o G ange non-causali y
ha e been ca ied ou . Th ee es s a is ics ha e been compu ed, see
Ha ey (1981) in o de o es he hypo hesis ha w non G ange
causes p j', i.e. »n.G.c.«. The so-called di ec es , Tes No. 1, is
execu ed by a eg ession o p on lagged alues o i sel , i.e. p -u
i = 1, 2, ..., mi and on lagged alues o w i.e. w -j j = 1, 2, ..., 7712,
es ing he join signi icance o w -j, j = 1,2, ..., m2 by he usual
F- es .
OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/
DOI h ps://doi.o g/10.3790/schm.105.2-3.193 | Gene a ed on 2023-04-04 12:06:25
216 S end Hyllebe g and Ma in Paldam
Figu e
3:
Co elog ams be ween he p & w se ies
The 1913-80 Co . No e 1: The igu es show he unweigh ed
a e ages o he unde lying 14, 14 and
17 such co elog ams calcula ed.
The shaded a eas gi e he de ia ions
om symme y as ega ds he co -axis.
No e he p oblem wi h he las line
be o e he axis. The wo do ed lines
a e d awn symme ically and pa allel
wi h he co esponding hea y lines.
c. The 1948-80
pe iod (17
coun ies.
-3 -2 -1 +1 +2 +3
No e 2; x = -3, -2, -1, 0, +1, +2, +3 de ines he lead/lag axis whe e p
lags w by 3, 2, 1 and 0 yea s and hen leads by 1, 2 and 3 yea s.
OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/
DOI h ps://doi.o g/10.3790/schm.105.2-3.193 | Gene a ed on 2023-04-04 12:06:25