TESTING FOR EQUILIBRIUM IN THE AUSTRALIAN WAGE EQUATION

In this paper a range of unit root and cointegration tests are applied to the time-series variables most commonly found in the various speci fications of the Australian wage equation. We find a contradiction bet ween the standard Dickey-Fuller (DF) tests and the results from Johans en estimation regarding the order of integration. The conclusion we re ach using tests developed by Perron (1989,1990) is that all the variab les are trend stationary processes and that the cointegration framewor k is inappropriate in this case.