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- Title
Seven Centuries of Real Income per Wage-earner Reconsidered: A Note.
- Authors
Lydall, H. F.; Brown, E. H. Phelps
- Abstract
This article deals with the flaws of D. Loschky's alternative indices of the wage-rate of the building craftsman expressed in a composite unit of consumables estimated by Phelps Brown and Hopkins (BH) in 1956. He points out that BH used a price index of Laspeyres type, weighted by the consumption pattern at a base date. This could not take account of what must have been the effect of the rise in the price of food, relative to the non-food components of the composite commodity, in increasing the physical quantity of non-food relative to that of food in the course of time. Accordingly, he seeks to substitute Paasche-type indices, weighted according to the consumption pattern at a terminal date. The effect appears to be remarkable. The BH index of (for brevity) the real wage stands in the 1890s at a little more than double its value in the 1260s. In Loschky's real-wage index the corresponding ratio is sixfold. But this difference proves to stem largely from two sources of error. First, Loschky has used extrapolation to estimate the relative movement of the prices of food and non-food components over long periods, and the figures he obtains in this way differ widely from the original data used by BH. Second, he has omitted to notice the problem of principle involved in carrying backwards from 1451-1475 the Paasche price index he has formed from price series based on 1451-1475. It is, therefore, quite misleading for Loschky to label his graphs of the real-wage indexes as "Paasche" and "Laspeyres", as if the whole difference between them were due to the use of different index numbers.
- Subjects
LOSCHKY, D.; INCOME; WAGES; CONSUMPTION (Economics); REAL wages; PRICE indexes
- Publication
Economica, 1982, Vol 49, Issue 194, p201
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2553307