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Estimation of wage equations for New Zealand

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This paper estimates wage equations for New Zealand based on pooled data from the Household Economic Survey (HES) from 2006/07 to 2010/11. Equations are estimated separately for couple men and women, single men and women and sole parents. The results are compared to previous New Zealand estimates using the HES from 1991 to 2001. We estimate wage equations and account for possible sample selection bias. Our estimates of the wage equations are largely comparable to the earlier estimates. We extend the equations to predict wage rates for workers and non-workers by drawing from the estimated wage distribution. We find that sample selection is significant for married men, single women and sole parents but not significant for married women and single men. Overall, we find that wage rates are positively related to age, education and experience but the wage rates are generally lower for non-Europeans and for people living outside Auckland.

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  • Joseph Mercante & Penny Mok, 2014. "Estimation of wage equations for New Zealand," Treasury Working Paper Series 14/09, New Zealand Treasury.
    • Handle: RePEc:nzt:nztwps:14/09
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    File URL: https://treasury.govt.nz/sites/default/files/2014-04/twp14-09.pdf
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    References listed on IDEAS

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    1. Christopher Ball & John Creedy, 2014. "Population ageing and the growth of income and consumption tax revenue," New Zealand Economic Papers, Taylor & Francis Journals, vol. 48(2), pages 169-182, August.
    2. Guyonne Kalb & Rosanna Scutella, 2004. "Wage and employment rates in New Zealand from 1991 to 2001," New Zealand Economic Papers, Taylor & Francis Journals, vol. 38(1), pages 21-47.
    3. Dean Hyslop & Dave Maré, 2009. "Skill Upgrading in New Zealand, 1986–2001," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(4), pages 422-434, December.
    4. Robert Breunig & Joseph Mercante, 2010. "The Accuracy of Predicted Wages of the Non‐Employed and Implications for Policy Simulations from Structural Labour Supply Models," The Economic Record, The Economic Society of Australia, vol. 86(272), pages 49-70, March.
    5. Sholeh Maani, 1999. "Private and Public Returns to Investments in Secondary and Higher Education in New Zealand Over Time: 1981-1996," Treasury Working Paper Series 99/02, New Zealand Treasury.
    6. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    7. Geoff Lewis & Steven Stillman, 2007. "Regional economic performance in New Zealand: How does Auckland compare?," New Zealand Economic Papers, Taylor & Francis Journals, vol. 41(1), pages 29-68.
    8. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053.
    9. John Creedy & Alan S. Duncan, 2000. "Wage Functions for Demographic Groups in Australia," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 4(4), pages 296-316, December.
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    Cited by:

    1. Kotamäki Mauri, 2016. "Participation Tax Rates in Finland, Earnedincome Tax Credit Investigated," Discussion Papers 107, Aboa Centre for Economics.
    2. Creedy, John & Gemmell, Norman & Hérault, Nicolas & Mok, Penny, 2018. "Microsimulation Analysis of Optimal Income Tax Reforms. An Application to New Zealand," GLO Discussion Paper Series 213, Global Labor Organization (GLO).
    3. Creedy, John & Gemmell, Norman & Hérault, Nicolas & Mok, Penny, 2018. "Microsimulation Analysis of Optimal Income Tax Reforms. An Application to New Zealand," GLO Discussion Paper Series 213, Global Labor Organization (GLO).
    4. John Creedy & Penny Mok, 2017. "Labour supply in New Zealand and the 2010 tax and transfer changes," New Zealand Economic Papers, Taylor & Francis Journals, vol. 51(1), pages 60-78, January.
    5. Penny Mok & Joseph Mercante, 2014. "Working for Families changes: The effect on labour supply in New Zealand," Treasury Working Paper Series 14/18, New Zealand Treasury.
    6. Nolan, Matt, 2018. "New Zealand Wage Equations: 1988-2013," Working Paper Series 7659, Victoria University of Wellington, Chair in Public Finance.
    7. John Creedy & Penny Mok, 2017. "Labour supply in New Zealand and the 2010 tax and transfer changes," New Zealand Economic Papers, Taylor & Francis Journals, vol. 51(1), pages 60-78, January.
    8. John Creedy & Penny Mok, 2019. "Labour supply elasticities in New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 53(2), pages 125-143, May.
    9. Mauri Kotamäki & Joonas Ollonqvist, 2018. "Financial Incentives to Work Decomposed: The Finnish Case," Discussion Papers 119, Aboa Centre for Economics.
    10. Joseph Mercante & Penny Mok, 2014. "Estimation of Labour Supply in New Zealand," Treasury Working Paper Series 14/08, New Zealand Treasury.
    11. Nazila Alinaghi & John Creedy & Norman Gemmell, 2020. "The Redistributive Effects of a Minimum Wage Increase in New Zealand: A Microsimulation Analysis," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 53(4), pages 517-538, December.

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    More about this item

    Keywords

    wage rate; labour supply; selection bias; wage prediction;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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