IDEAS home Printed from https://ideas.repec.org/p/abn/wpaper/auwp2012-05.html
   My bibliography  Save this paper

Wages in a Factor Proportions Model with Energy Input

Author

Listed:
  • Hyeongwoo Kim
  • Henry Thompson

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.

Suggested Citation

  • Hyeongwoo Kim & Henry Thompson, 2012. "Wages in a Factor Proportions Model with Energy Input," Auburn Economics Working Paper Series auwp2012-05, Department of Economics, Auburn University.
    • Handle: RePEc:abn:wpaper:auwp2012-05
    as

    Download full text from publisher

    File URL: https://cla.auburn.edu/econwp/Archives/2012/2012-05.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kevin H. O'Rourke & Jeffrey G. Williamson, 1992. "Were Heckscher and Olin right? : putting history back into the factor-price equalization," Working Papers 199207, School of Economics, University College Dublin.
    2. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    3. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394, Elsevier.
    4. Henry Thompson, 1985. "Complementarity in a Simple General Equilibrium Production Model," Canadian Journal of Economics, Canadian Economics Association, vol. 18(3), pages 616-621, August.
    5. Ruffin, Roy J., 1981. "Trade and factor movements with three factors and two goods," Economics Letters, Elsevier, vol. 7(2), pages 177-182.
    6. Leamer, Edward E, 1996. "Wage Inequality from International Competition and Technological Change: Theory and Country Experience," American Economic Review, American Economic Association, vol. 86(2), pages 309-314, May.
    7. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    8. Dollar, David & Wolff, Edward N, 1988. "Convergence of Industry Labor Productivity among Advanced Economies, 1963-1982," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 549-558, November.
    9. Mountain, Dean C., 1986. "Impact of higher energy prices on wage rates, return to capital, energy intensity and productivity : A regional profit specification," Energy Economics, Elsevier, vol. 8(3), pages 171-176, July.
    10. Pesaran, M. Hashem & Shin, Yongcheol, 1996. "Cointegration and speed of convergence to equilibrium," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 117-143.
    11. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    12. Henry Thompson, 2010. "Wages in a factor proportions time series model of the US," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 19(2), pages 241-256.
    13. Hyeongwoo Kim, 2013. "Generalized impulse response analysis: General or Extreme?," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 10(2), pages 135-141, Julio – D.
    14. Chang, Winston W, 1979. "Some Theorems of Trade and General Equilibrium with Many Goods and Factors," Econometrica, Econometric Society, vol. 47(3), pages 709-726, May.
    15. Mokhtari, Manouchehr & Rassekh, Farhad, 1989. "The Tendency towards Factor Price Equalization among OECD Countries," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 636-642, November.
    16. Harris, R. I. D., 1992. "Testing for unit roots using the augmented Dickey-Fuller test : Some issues relating to the size, power and the lag structure of the test," Economics Letters, Elsevier, vol. 38(4), pages 381-386, April.
    17. Alfred Tovias, 1982. "Testing Factor Price Equalization in the EEC," Journal of Common Market Studies, Wiley Blackwell, vol. 20(4), pages 375-388, June.
    18. Hans J. Gremmen, 1985. "Testing The Factor Price Equalization Theorem in the EC: An Alternative Approach," Journal of Common Market Studies, Wiley Blackwell, vol. 23(3), pages 277-286, March.
    19. Hertel, Thomas W., 2002. "Applied general equilibrium analysis of agricultural and resource policies," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 26, pages 1373-1419, Elsevier.
    20. Jones, Ronald W. & Easton, Stephen T., 1983. "Factor intensities and factor substitution in general equilibrium," Journal of International Economics, Elsevier, vol. 15(1-2), pages 65-99, August.
    21. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    22. Hall, Alastair R, 1994. "Testing for a Unit Root in Time Series with Pretest Data-Based Model Selection," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 461-470, October.
    23. Thompson,Henry, 2009. "International Economics," Cambridge Books, Cambridge University Press, number 9788175967199, January.
    24. Wolfgang F. Stolper & Paul A. Samuelson, 1941. "Protection and Real Wages," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 9(1), pages 58-73.
    25. O'Rourke, K. & Williamson, J.G., 1992. "Were Heckscher and Olin Right? Putting History Back into the Factor-Price Equalization Theorem," Harvard Institute of Economic Research Working Papers 1593, Harvard - Institute of Economic Research.
    26. Thompson, Henry, 2011. "Estimating the Heckscher-Ohlin model: Inverting the inverse matrix," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 185-192, April.
    27. Kevin O'Rourke & Jeffrey G. Williamson, 1992. "Were Heckscher and Ohlin Right? Putting the Factor-Price-Equalization Theorem Back into History," NBER Historical Working Papers 0037, National Bureau of Economic Research, Inc.
    28. Ronald W. Jones, 2018. "The Structure of Simple General Equilibrium Models," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 4, pages 61-84, World Scientific Publishing Co. Pte. Ltd..
    29. Rassekh, Farhad & Thompson, Henry, 1997. "Adjustment in General Equilibrium: Some Industrial Evidence," Review of International Economics, Wiley Blackwell, vol. 5(1), pages 20-31, February.
    30. Jon Ford & Henry Thompson, 1997. "Global Sensitivity of Neoclassical and Factor Proportions Models to Production Technology," International Economic Journal, Taylor & Francis Journals, vol. 11(3), pages 61-74.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thompson, Alexi & Thompson, Henry, 2021. "The imputed effect of US tariffs on wages," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 191-197.
    2. You-hua Chen & Chan Wang & Pu-yan Nie, 2020. "Emission regulation of conventional energy-intensive industries," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(4), pages 3723-3737, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kim, Hyeongwoo & Thompson, Henry, 2009. "Factor Proportions Wages in a Structural Vector Autoregression," MPRA Paper 17798, University Library of Munich, Germany.
    2. Thompson, Alexi & Thompson, Henry, 2021. "The imputed effect of US tariffs on wages," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 191-197.
    3. Saygılı, Hülya, 2017. "Production fragmentation and factor price convergence," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 535-544.
    4. Kim, Hyeongwoo, 2012. "VECM estimations of the PPP reversion rate revisited: The conventional role of relative price adjustment restored," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 223-238.
    5. Henry Thompson, 2010. "Energy Substitution, Production, and Trade in the US," Auburn Economics Working Paper Series auwp2010-06, Department of Economics, Auburn University.
    6. Henry Thompson, 2016. "Tariffs and Wages in Trade Theory," Review of Development Economics, Wiley Blackwell, vol. 20(2), pages 399-405, May.
    7. Henry Thompson, 1995. "Free trade and income redistribution in some developing and newly industrialized countries," Open Economies Review, Springer, vol. 6(3), pages 265-280, July.
    8. Thompson, Henry, 2014. "An energy factor proportions model of the US economy," Energy Economics, Elsevier, vol. 43(C), pages 1-5.
    9. Soytas, Ugur & Sari, Ramazan, 2006. "Energy consumption and income in G-7 countries," Journal of Policy Modeling, Elsevier, vol. 28(7), pages 739-750, October.
    10. Rassekh, Farhad, 2010. "Is Stolper-Samuelson dangerous and FPE a failure?," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 555-561, October.
    11. Ewing, Bradley T. & Sari, Ramazan & Soytas, Ugur, 2007. "Disaggregate energy consumption and industrial output in the United States," Energy Policy, Elsevier, vol. 35(2), pages 1274-1281, February.
    12. Drakos, Anastassios A., 2016. "Does the relationship between small and large portfolios’ returns confirm the lead–lag effect? Evidence from the Athens Stock Exchange," Research in International Business and Finance, Elsevier, vol. 36(C), pages 546-561.
    13. Esfahani, Hadi Salehi & Mohaddes, Kamiar & Pesaran, M. Hashem, 2013. "Oil exports and the Iranian economy," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(3), pages 221-237.
    14. Uğur Soytas & Engin Kucukkaya, 2011. "Economic growth and financial development in Turkey: new evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 18(6), pages 595-600.
    15. Lee, Chien-Chiang & Chien, Mei-Se, 2010. "Dynamic modelling of energy consumption, capital stock, and real income in G-7 countries," Energy Economics, Elsevier, vol. 32(3), pages 564-581, May.
    16. Henry Thompson, 2010. "The Stolper-Samuelson Box," Chapters, in: Mark Blaug & Peter Lloyd (ed.), Famous Figures and Diagrams in Economics, chapter 40, Edward Elgar Publishing.
    17. Mohaddes Kamiar & Raissi Mehdi, 2013. "Oil Prices, External Income, and Growth: Lessons from Jordan," Review of Middle East Economics and Finance, De Gruyter, vol. 9(2), pages 99-131, August.
    18. Yoshiaki Nakada, 2018. "Deriving the factor endowment--commodity output relationship for Thailand (1920-1927) using a three-factor two-good general equilibrium trade model," Papers 1810.04819, arXiv.org.
    19. Carlos Capistrán & Daniel Chiquiar & Juan R. Hernández, 2019. "Identifying Dornbusch's Exchange Rate Overshooting with Structural VECs: Evidence from Mexico," International Journal of Central Banking, International Journal of Central Banking, vol. 15(5), pages 207-254, December.
    20. Andreas Pfingsten & Reiner Wolff, 2009. "Factor Supply Changes in Small Open Economies: Rybczynski Derivatives under Increasing Marginal Costs," Finnish Economic Papers, Finnish Economic Association, vol. 22(1), pages 9-20, Spring.

    More about this item

    Keywords

    Wages; Energy; Factor Proportions Model; Vector Autoregression;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:abn:wpaper:auwp2012-05. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hyeongwoo Kim (email available below). General contact details of provider: https://edirc.repec.org/data/deaubus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.