Estimation of Wage Equations for New Zealand (WP 14/09)

Abstract

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.

Acknowledgements

Access to the data used in this paper was provided by Statistics New Zealand in accordance with security and confidentiality provisions of the Statistics Act 1975. We would like to thank Guyonne Kalb, John Creedy, Gerald Minnee, Nick Carroll and referees for their helpful comments and assistance. This paper was undertaken while Joseph Mercante was on secondment to the New Zealand Treasury.

Disclaimer

The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the author(s). They do not necessarily reflect the views of the New Zealand Treasury or the New Zealand Government. The New Zealand Treasury and the New Zealand Government take no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.