Moving-Average Transformations in Classical Linear Models

Economists are frequently compelled to use data which take inappropriate forms. One particular deficiency is discussed in the paper below; namely, the prior adjustment of economic time-series by moving average transformations. This discussion is restricted to regression analyses and data which satisfy the conditions for the classical linear model.

Temporal Spillover and Autocorrelation in Some Aggregate Models of Wage-Determination

In a recent paper, we discussed the possible availability of prior information with respect to the source of the moving-average components of mixed moving-average autoregressive processes in the context of empirical investigations of wage-determination. The earlier discussion of this generalization of the Yule-Slutsky effect ignores the possible presence of lagged endogenous variables, which may be due to explicit temporal spillovers between different wage-bargains in the labour market. This omission is remedied in this paper, and several final equations for models with temporal spillovers are given below. These can be contrasted with the final equation for a simple model in which the spillover feedback is restricted to autoregressive processes for the stochastic errors of theoretical relations. Also, in this paper the different specifications can be associated with a collection of linear hypotheses for which conventional least-squares statistics provide suitable test statistics if samples of data are sufficiently large. Knowledge of the weights for the moving-average components is an essential framework for the procedures which are outlined.

Known Moving-Average Transformations and Autoregressive Processes

The errors in the linear models which are used so widely by economists may be generated by mixed moving-average autoregressive processes. If errors on an aggregative equation are generated by a mixed moving-average autoregressive process and the weights of the moving-average component of this process are known, then the least-squares procedure can yield consistent estimators of both signal and autoregressive parameters if two adjustments are made to the equation. The autoregressive transformation is combined with pre-multiplication by a Moore-Penrose inverse based on the known weights of the moving-average component.

The Sensitivity of Quarterly Models of Wage Determination to Aggregation Assumptions

In his A.E.A. Presidential Address, Tobin points out that due to the continuing controversy over the concept of a stable Phillips curve, the institutional features of the labour market have been largely ignored. Hence, the purpose of this paper is twofold: (1) to present an analytical framework for the empirical investigation of these institutional labour market features, and (2) to present some empirical results demonstrating the gravity of the problem.

An Investigation of the Efficiency of Introductory Economics Courses

In most academic circles, inquiring into the value and/or success of education has been considered akin to questioning motherhood. Economic research on the "value"of education has centred largely on two issues; the first one being human capital theory and the structure of earnings, and the second being the contribution of education to economic growth. This paper represents the first report of a project designed to examine the "efficiency" of the first year economics course. The first part of the project is to identify and quantify the factors that account for student performance in the introductory course. Secondly, the amount of "new" economic knowledge retained over subsequent years will be examined. Finally, with learning and retention factors carefully analysed, an attempt will be made to explore techniques for increasing "efficiency" in the introductory economics course. The ultimate question towards which ths research is directed is whether there are significant effects from varying the teaching-learning configuration or not.

A Second Look at the Roles of Quit Rates and Exceptional Variables in the Determination of Money Wages

In his recent discussion of wage-determination in the U.S. manufacturing industry and its durable and non-durable components, Arthur Donner attempts to explore the short-run interaction of labour turnover and inflationary expectations by incorporating this interaction into a "a two-equation model suitable for econometric testing". His tentative conclusions concern both the direct roles of these variables and the speeds of adjustment of wage changes to prior expectational changes. Since theoretical analyses cannot establish the quantitative significance of biases and false inferences, our numerical results provide important results with respect to the robustness of Donner's estimates. They appear to confirm a significant role for excess demand, but the effect of inflationary price expectations remains uncertain in the absence of prior information with respect to the speeds of adjustment to such expectations. In his list of tentative conclusions, Donner cites one particular result which he had not anticipated. "The implication that the wholesale price index fits into the estimating equation slightly better than the consumer prices is somewhat startling at first, but may present some support for the hypothesis that prices and wages are raised when labour supply tightens--and particularly when vacancies rise above their steady-state values. There appears to be some tentative support in these findings for the hypothesis that the money illusion exists in the short-run." Our results suggest that the use of the wholesale price index (WPI) leads to substantially better fits than the use of the consumer price index (CPI) for both total manufacturing and its separate components. Finally, a model which contains the unusual specification of wage expectations as an explanatory variable for money wage changes is conclusively rejected by our results.

The Specification of Institutional Features in the Determination of Wages in Canadian Manufacturing Industries

As demonstrated in a recent paper, quarterly models of wage determination are highly sensitive, both with respect to parametric estimates and statistical inferences, to the specification of institutional features in the labour market. In the context of these sensitivities, this paper attempts to eliminate a severe deficiency in relevant data by the provision, in tabular form, of time-series which summarize evidence for critical institutional features of the Canadian labour market. The first section contains a brief overview of the data set and examines certain issues such as the coverage of the sample, seasonal patterns in bargaining, and the average lengths of contracts. This overview is followed in the second section by an account of a particular analytical model which incorporates these institutional features in a form appropriate for estimation of behavioural parameters. Finally, some statistics for the institutional characteristics of the labour market (by reference to the analytical model) are provided in the form of a collection of variable weights. These weights will be employed in a subsequent paper for which the behavioural parameters of the market will be estimated.

Autocorrelation in Empirical Studies of Wage Determination

The need for careful specification in econometric analyses is well-known. If some component of a particular specification is incorrect, then conventional inferential procedures may be invalid. In particular, the presence of autocorrelation in linear economic models may lead to the use of inappropriate formulae for estimates of standard errors of estimated coefficients and for F-statistics which provide the bases for tests of significance. Concern over this problem has generally been represented in recent years by two checks of sensitivity, namely, the calculation of Durbin-Watson d-statistics and the use of either autoregressive transformations of the type introduced by Cochrane and Orcutt (1949) or similar approaches such as the Hildreth-Lu (1960) scan procedure, which can be associated with maximum likelihood methods. At the same time, econometric studies of wage determination provide an excellent illustration of certain specific deficiencies which may be introduced by conventional checks of sensitivity. Clarification of the quantitative significance of these deficiencies depends critically upon adequate investigation of institutional features of the labour market, and we cannot claim to have achieved this final goal. However, incompleteness of knowledge does not preclude a demonstration that current practices in empirical studies of wage-determination leave much to be desired. Two well-known studies of Phillips curves, those of Perry and Bodkin et al., provide the bases for discussion.

Quarterly Models of Wage Determination: Some New Efficient Estimates

The concept of stable Phillips curves and their economic implications have been the subject of a series of disputes in recent years. Since Phillips introduced his simple disequilibrium model,empirical research in the field of wage determination has indicated a wide spectrum of explanatory variables which expands and contracts almost randomly in published studies. Apart from this difficulty in specification, the intertemporal instability of estimated coefficients for Phillips curve variants is particularly disturbing. In addition, the theoretical bases for many of these variants are unclear, and several economists have participated in a neo-classical counter-attack on the existence and stability of Phillips curves from a theoretical viewpoint. The objectives of this paper are to examine the consequences of certain invalid statistical procedures which are employed in many of these studies and to provide some empirical evidence of their effect. In particular, we focus attention on the implications of the aggregate procedure which provides the basis for the use of a "four quarter overlapping change" representation of the dependent variable in quarterly studies of wage determination and, also, for the use of moving averages of explanatory variables.

The Impact of Public Sector Wage Controls in Ontario

Dans cet article, les auteurs analysent le processus d'inflation des salaires en Ontario pendant la période 1978-1983 en accordant une attention particulière aux effets du programme de contrôle des salaires dans le secteur public en 1982-1983. On s'est penche principalement sur les données détaillées de 2 543 contrats salariaux pour établir le modèle et la structure des majorations de salaires, tant dans le secteur public que dans le secteur prive en Ontario, en divisant le secteur public en quatre sous-sections: (municipalités, conseils scolaires, institutions de sante, fonction publique provinciale).Les données statistiques révèlent que les ententes en matière de salaires dans le secteur public en Ontario ont suivi les conditions changeantes du marche du travail et les fluctuations de l'inflation. Les statistiques fortement négatives de la régression relative aux variations des salaires démontrent que la structure des gains salariaux dans le secteur public en Ontario peut être caractérisée par une véritable restriction des salaires durant la période 1978-1983. Alors que l'importance relative des variables explicatives est quelque peu différente entre le secteur public et le secteur prive, il n'y a pas d'indication marquée que les augmentations de salaires en général ont été établies d'une façon radicalement différente que les majorations dans le secteur prive au cours de la période 1978-1983.En septembre 1982, le gouvernement ontarien a mis au point un programme de contrôle des salaires dans le secteur public, limitant les augmentations de traitement à cinq pour cent pour une année. Une étude économétrique démontre que le programme de contrôle des salaires des années 1982-1983 dans le secteur public en Ontario a exerce un effet négatif plutôt modeste sur les ententes en matière de salaires dans les sous-secteurs des conseils scolaires, des municipalités et de la fonction publique provinciale. Cependant, dans le sous-secteur des institutions de sante, les contrôles semblent avoir augmente le volume des règlements salariaux. Il se peut, ce qui est surprenant, que les controles dans le secteur public apparaissent aussi avoir eu une très légère influence en freinant les majorations de salaires dans le secteur prive qui n'était soumis à aucun contrôle.Alors qu'il y a une opinion très répandue selon laquelle les augmentations de traitement dans le secteur public influencent les négociations salariales dans le secteur prive, nous avons aussi vérifie, à des fins statistiques, la signification des dépassements dans le secteur prive du rapport des changements de salaires. Tandis que les depassements de gains industriels spécifiques à l'intérieur du secteur prive sont très considérables, les ententes relatives aux salaires dans le secteur public ont eu un effet minimal sur les négociations des salaires dans le secteur prive. Prétendre que les fluctuations des salaires dans le secteur public au cours de la période 1978-1983 ont soutenu et exacerbe l'inflation salariale dans le secteur prive ne saurait être démontre statistiquement.This paper seeks to evaluate the effectiveness of Ontario's public sector wage and price controls in ternis of the rate of change in public sector wag