An Examination of the Rate of Wage Change in Durable and Non-Durable Goods Industries for Canada: A Quarterly Econometric Model

Abstract

<p>This thesis examines the rates of change of the average money wage rates for the Canadian durable and non-durable goods industries. The paper begins with a model which is used to derive a wage change equation.</p> <p>The hypothesis to be tested is that the same factors affect wage changes differently in the durable and non-durable goods industries. To undertake the testing of this hypothesis, a wage change equation is fitted for each of the industries using earnings data, price and output indexes for each of the two industrial groupings. Each of the estimated equations for the two industries is then compared and a statistical test is conducted to determine the statistical significance of the differences in the estimated c6efficients of the variables for the two broad industries.</p> <p>The results indicate that the rates of wage change for the two industrial groups respond differently to the same factors. In particular, variations in current selling prices of non-durable goods do not have the anticipated effect on the change in the wage rate in that industry in the same time period. In the durable goods industry, variations in current output and prices have a statistically significant positive impact on percentage changes of the current wage rate for that industry. The wage rate in both industries responds negatively to a one period lag in the change in the unemployment rate, although the change in the unemployment rate variable is statistically more significant in the wage change equation estimated for the non-durable goods industry.</p>