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Price determination in Australia : a disaggregated approach.


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Groenewold, N 1974 , 'Price determination in Australia : a disaggregated approach.', Unspecified thesis, University of Tasmania.

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The primary aim of this thesis is to obtain estimated sectoral
price equations for Australia using quarterly data for the period
1960-61 to 1972-73. The secondary aim of the study is to use the
estimated price equations obtained to make a sector by sector comparison
of the determinants of sectoral prices and of the lags with which prices
respond to these determinants. Aggregate price equations are also
estimated and compared with the estimated sectoral price equations in
order to determine whether extra information is gained by estimating
separate price equations for different sectors. In the first chapter
of the thesis some arguments are advanced supporting the view that a
sectoral approach to the study of price determination may be necessary
to obtain a better understanding of the way in which prices are
Before attempting to accomplish the primary aim of this thesis
two chapters are devoted to a brief review of the most important price
equations studies carried out for overseas countries and for Australia
- Chapter 2 contains a survey of the overseas studies and Chapter 3
contains a survey of the Australian studies. It was found that the
Australian work was less extensive than the overseas work both as
regards the types of disaggregation used and the types of explanatory
variables tested. Chapter 3 concludes with proposals for work to be
carried out in this study, these proposals consisting largely of
proposals for using alternative types of disaggregation and incorporating
variables which have been successfully tested overseas but not in Australia.
The fourth chapter discusses the data available for carrying
out the programme outlined in the preceding chapter. It was found
that little of the required data was available and much of the data
needed in the regression analysis had to be constructed from available
data. As a result of this Chapter 4 contains a rather extensive discussion
of the data used and the series constructed are reproduced in
an appendix. The discussion of the data revealed that three different
types of disaggregation could be used and since the studies reviewed
gave little indication as to which type of disaggregation would be the
most useful, all three types were experimented with.
The regression results for the final demand type sectors are
discussed in Chapter 5, the results obtained for consumer goods sectors
are discussed in Chapter 6 and the results for geographical sectors are
discussed in Chapter 7. It was found that labour costs were the most
important determinant of prices. Various types of labour cost variables
were tried. Some were adjusted for changes in short-run productivity
to form unit labour cost variables and some for changes in long-run
productivity to form "normal" unit labour cost variables. It was
found that the labour cost variables unadjusted for productivity (i.e.,
minimum wage rate and earnings variables) were the most successful.
The only other variable which was consistently significant for all
sectors for which it was used is the sales tax and excise variable.
Materials costs were significant for some sectors only and of the many
types of demand variables tried, none were consistently significant
although several of the preferred equations included a demand variable. In Chapter 8 the results for the three types of disaggregation
are compared and it is argued that additional information concerning
price determination in Australia is indeed obtained by using a sectoral
approach. It is felt that further work in this area is warranted and
that the disaggregation by final demand categories and the disaggregation
by consumer categories are likely to be more useful than the
geographical disaggregation. However, the difficulty of obtaining
suitable sectoral data must be balanced against the advantages of using
the sectoral approach to the study of price determination.

Item Type: Thesis - Unspecified
Authors/Creators:Groenewold, N
Keywords: Prices
Copyright Holders: The Author
Copyright Information:

Copyright 1974 the Author - The University is continuing to endeavour to trace the copyright
owner(s) and in the meantime this item has been reproduced here in good faith. We
would be pleased to hear from the copyright owner(s).

Additional Information:

Thesis (M.Ec.) - University of Tasmania, 1975.

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