New Zealand Wage Equations: 1988-2013

Abstract

This paper reports estimates for wage equations for New Zealand wage and salary earners for four periods: 1987/88-1990/91, 1991/92-1997/98, 2000/01-2007/08, and 2008/09-2012/13. Utilizing data from the Household Economic Survey (HES) between 1987 and 2013 the appropriate data are pooled and separated into five demographic groups (coupled men, coupled women, single men, single women, and single parents), allowing the estimation of five wage equations for each year. Each of these 20 wage equations is tested for selection bias and estimation is adjusted using the Heckman correction where appropriate. Unlike prior estimates of the New Zealand wage equation, there is an allowance for variance in the selection equation. The main purpose of such an exercise is to impute wage rates for those who are not employed, information that is necessary for future estimates of the subgroups preference between leisure and wage income. However, these estimates are also used to discuss the evolution of the wage equation for varying demographic groups through time. This allows for a quantitative description of how the return to observed characteristics changed for demographic subgroups between 1988 and 2013.