Constant-Utility Index Numbers of Real Wages: Revised Estimates
In the March 1977 issue of this Review I presented a critique of the published Bureau of Labor Statistics (BLS) series on real wages by contrasting them with some constant-utility index numbers of real wages. The latter are derived first by solving the representative consumer-worker's indirect utility function for that wage rate which restores some base period's utility after all commodity prices have changed, and second by expressing this constant-utility wage rate as a fraction of actual wage rates. In making these calculations I made use of recently published estimates of the StoneGeary utility function by Michael Abbott and Orley Ashenfelter. Unfortunately, I subsequently discovered that Abbott and Ashenfelter had miscoded some of their data so that their estimates were incorrect. This also rendered my constant-utility index numbers incorrect. Abbott and Ashenfelter have now reestimated their system of equations and with their revised estimates I now present my recalculated constant-utility real wages.' For details of the underlying argument, the reader is referred to the original article. The recalculated estimates of the parameters of the Stone-Geary function are presented in the first two columns of Table 2. The estimate of 'Yh (namely, 2,331 hours per year) implies that the constraint (,yh h) > 0 is not satisfied for the years 1929-33, 1937, and 1939-45. For this reason I do not present estimates of these constant-utility wage rates for these years and, in particular, I have selected 1946 (rather than 1939 as in TABLE 1-PUBLISHED INDEX NUMBERS OF REAL WAGES
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