A Quality Adjusted Wage Index

Abstract

In this paper, a new method of estimating a wage index is proposed and implemented. We\r\nconstruct a wage index by controlling for quantity, as well as quality of labor. Our approach\r\nuses a set of year dummies as the basis for calculation of a wage index. The March Current\r\nPopulation Survey Supplement (1983-2000) is employed, and empirical wage equation\r\nmodels are estimated in this paper. The estimation results of the proposed wage index suggest\r\nthat the existing Employment Cost Index perhaps overestimates the increases in wages\r\nadjusted for quality.