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Introduction: On Replication
go down to history just as the Phillips curve chap (letter to the author, 3 February 1986). The curve was only a major incident in the
3. I develop the distinction between the estimating methods of Phillips 1958a and Lipsey
1960 originally made by C. L. Gilbert (1976).
10
$1
0
X
10
II
* o
-8
-16
-24
-32 r
0
21
10
12
14
16
18
20
22
12
11
10
fitted 10 1861-1913 data
-Curve
9
8
7
6
5
4
I
0 ,
12
11
x 51
10
-Curve
9
8
I
6
5
4
3
2
0 ,
10
-Curve
r
2
0
68
-2
-4
61
10
11
10
11
12
401
10
8
6
4
r
2
83
8
86
0
19
-2
-4
0I
10
II
12
-Curve
- 86
92
93
10
11
402
10
8
6
4
$I
0
03
-2
-4
10
11
+Curve fitted
I86 1- 19 13 data
10
10
11
+ a = bxC+ k (l/x'")
a,b,m>O
(dxldt)
+ el
(1)
k,ccO
(Phillips 1958a, 291 ;Gilbert 1976; Lipka 1918, viii). The simple form of
equation (1) was consistent with Phillips's interpretation of wage inflation as mainly the outcome of the competitive bidding of labor (Phillips
1958a, 284, 298; Desai 1984, 255-57). Unemployment rather than inflation figured as the right-hand-side variable since Phillips viewed unemployment as a proxy for aggregate demand, which could be stabilized
by monetary policy (Phillips 1954, 315; 1958a, 299; Wulwick 1989,
185-86).
The computing programs available in the 1950s could not solve most
nonlinear problems (Goldstine and von Neumann 1963,2). No computing programs existed that could use the least-squares criterion to search
for the unknown parameters of an equation like (l), which cannot be
1 1 . Equation ( 1 ) can be written as the generalized hyperbola y
( d x l d t ) ] ,a = -c
(k/xm-)
+a
= (I/xa)[b
404
+ a ) = log(b) + c log(x) + e2
a,b>O
e2
= el
c t O
+ (k/x") (dxldt).
12. E ( 6 ) = b C C O V [ X C , l / x m ( d x / d t ) ] .
13. r ( x , d x / d r ) = cov [ x ,( d x l d r ) ]
:r
2
10
8
6
>
2
I1
a
-2
-4
10
x
Figure 11 Averages superimposed upon the 6.5 business cycles,
1861-1913. Mean coordinates: (1.52,5.06), ( 2 . 3 5 , l . 55), (3.48,O. 85),
(4.49,O. 35), (5.95, -0. 18), (8.37, -0.35).
52-53). Phillips averaged his data to reduce the omitted variable bias,
explaining that since each interval [of my figure 113 includes years in
which unemployment was increasing and years in which it was decreasing the effect of changing unemployment on the rate of change of wage
rates tends to be cancelled out by . . . averaging, so that each cross
gives an approximation to the rate of change of wages which would be
associated with the indicated level of unemployment if unemployment
were held constant at that level (Phillips 1958a, 290-91). Accordingly,
equation (2) estimated the relation holding between y and x when the
omitted variable d x / d t x O.I4
The Imprecision of k
Phillips observed from the graphs of five of the complete business cycles
(figures 4-5,7-10) that there is a close relation between the deviations of
14. H. Brauchli (1972) and M. Desai (1975,9-10), as well as A. C. Chiang (1984,493-94),
present thc formal basis for the argument.
15. As it turned out, the standard crror of the estimate of k by means of modern nonlinear
least squares is relatively small (table 4, equation Ib).
16. Sturgess rule to determine the number of groups states that when n is the number of
groups and N the number of observations, then 2- = N (Sturges 1926.65). The fifty-three
observations call for seven groups (n = 6.73).
17. Wulwick 1989 states, since Phillips left no papers, we do not know if he tried out
alternative intervals (180). For a long time, researchers understood that Phillips left no papers
(telephone conversations with the author and A. Sleeman, 16 June and 23 October 1995).
According to C. A. Blyth, Phillipss biographer, as far as I can find out his widow has no papers
(letter to the author, 6 October 1986). In 1994, Phillipss widow donated papers to the LSE
archival collection (Collection Miscellaneous, 857). None of the papers in the collection concern
the Phillips curve, except for a large table of data, which does not contain any information about
the choice of intervals.
a=O
z = 1. . .4
(2b)
for the four crosses of the graph of averages in the northeast quadrant.
The results were bl = 13.08 and t1= -2.35.
Step 2 Given hI and &, I predicted wage inflation for the two crosses
in the southeast quadrant of the graph of averages and found the average
absolute deviation D of the predicted ypzfrom the actual average inflation
- y,1/2 for z = 5,6. For Round 1 , D1 = 0.4.
rate yz,where D =
lrpz
Round 2, Step I
408
absolute deviation 0
Round 3.
Next, he could have searched for value of & that permitted equation (la)
to fit the fifty-three observations most closely (see table 11).Phillips, having searched in the range 0 5 h 5 2, would have arrived at least-squares
estimates of his preferred equation (1) (table 4, equation la; figure 12).
The differences between the estimates of Phillips's equation (1) given
the best technique available in 1958 and modern nonlinear least squares
are minor (table 4, equations 1a, 1b). The striking difference is the weeks
that Phillips would have needed to estimate equation (1) compared to the
minutes that it takes contemporary economists.
The technological limits to nonlinear least-squares estimation compelled Phillips to rely heavily on graphical discourse (Phillips 1958a,
287-90). Phillips saw that the Phillips curve for 1861-1913 (table 4,
equation 2a) fit the data of the 1929-37 trade cycle (Phillips 1958a, 295;
figure 2). Modern nonlinear least-squares estimation indicates no relation
between inflation and unemployment for 1929-37 or other periods during the interwar years. l 9 Next, Phillips superimposed the Phillips curve
for 1861-1913 onto the post-World War I1 data that formed a clock19. For the nonlinear least-squares trials for 1929-37. the program did not reach a solution
after 100 iterations with 4 groups of starting parameters: - a : - 1 , 1.0, -0.5; b: 7.2. 13.7;
c: -2, -2, - 1 , -2. A negative linear relation between money wage inflation and unemployment
appears in the data for the mid-1920s to the late 1930s. Phillips's discussion of the interwar
period (1958a, 295) admilscost push factors, which may explain why he did not use the interwar
data points in estimation (letter to the author from C. L. Gilbert, 27 January 1986).
3t
10
11
and
y =a
+bx- +
-d i
+ej,
(4)
for 1862- 1913 are virtually identical to the authors estimates (table 5 ,
equations 3 4 ) . However, Lipseys estimates for the twentieth century
are not repeatable given the data (shown in appendix 2) that Lipsey said
he used.
For the years 1923-39 and 1948-57, Lipsey estimated the equation
414
policy implications help explain the prevalence of the loops about the
fixed Phillips curve as a research topic.
Yet, my estimate of the effect of unemployment changes on wage
inflation was imprecise when based on the data Lipsey said he used
(table 5 , equation 5 ) . W. G. Bowen and R. A. Berry, two of the many
economists with research agendas shaped by Lipseys reported findings,
note that Lipsey reported a squared partial correlation coefficient for
y and i of only 0.3 (Bowen and Berry 1963, 170). I arrived at a
correlation coefficient of 0.02 using Lipseys reported data (table 7)more evidence of the unimportance of unemployment changes as an
influence on wage inflation.
Phillipss archival papers contain an alternative money-wage inflation
series for 1921-57. The series is based on the definition of wage inflation
later used by Lipsey and Steuer (appendix 1, equation [A1.3]; Lipsey and
Steuer 1961, 141). Substituting the alternative wage inflation series in
place of the series that Lipsey (1960) said he used results in a coefficient
on unemployment that is positive and statistically significant (table 6,
equation 5). The estimated squared partial correlation coefficient (ranging between 0.28 and 0.35) is close to Lipseys estimate (table 7).26
Lipsey estimated equation
for the periods 1923-29, 1929-39, and 1948-57 (table 5, equation 6L).
D. J. Smyth, another economist influenced by Lipsey (1960), noted that
Lipsey found the relationship between y and to be positive for 192329, negative for 1929-39, and positive for 1948-57; that is, he found an
anti-clockwise loop for 1929-39 as before World War I, but clockwise
loops for the other two sub-periods, 1923-29 and 1948-57 (Smyth 1979,
230; Lipsey 1960,27). My estimates of d for those years do not support
Lipseys conclusion about the sign for the post-World War I1 period.
Using either Lipseys reported wage-inflation series or the alternative
26. Archibald, who reestimated equation (5) for the 1948-27 time period, remarked that
. . . [XI was not in fact significant
(Archibald 1969, 128). Lipseys estimates of the equation pertained to 1923-39 and 1948-57.
Archibald apparently estimated the equation just for 1948-57. Archibald remarked that I have
absolutely no records of any econometric work aside from what was published . . . I think
everyone, editors included, was very careless about such matters in those days (letters to the
author from G. C. Archibald, 21 July 1993 and 25 April 1994). Archibald thought he made
satisfactory arrangements to preserve the data. Upon returning to England from abroad, he
found that the data were gone.
it seems, however, that his [Lipseys] coefficient for
Interwar Period Lipsey reported only one source of his p-data for
1862-1957, the 1950 Phelps, Brown, and Hopkins retail price index
(Lipsey 1960, 9). The index ends at 1938; given Lipseys definition of
price inflation as the relative first central difference, that index yields a
time series for price inflation ending with 1938. Yet Lipseys estimates
for the interwar period extended to 1939. Lipsey may have extrapolated
from the Phelps, Brown, and Hopkins data but neglected to report it, or
used an entirely different time series.
Postwar Period Lipseys article did not cite the source of the price inflation data for 1948-57. Lipsey suggested that I refer to the price index
published in the econometric study of the Phillips curve 1870-1958 by
Lipsey and his LSE colleague, M. Steuer (1961, table 7, column 4).28
28. Phone conversation between R. G. Lipsey and the author, week of 5 June 1989. According
to my records, Lipsey offered tocheckon the Phillips data when he went to London in September.
However, I did not hear from Lipsey again on the data problem. Lipsey-Steuer (1961) used the
same data for unemployment 1925-38 as Phillips (Lipsey-Steuer 1961, table 7, column 2).
The wage index 1925-38 in Lipsey-Steuer (given differences in rounding when adjusting for
418
Steuer, recalling the statistical practices of his early years as an economist, explained why finding out what data Lipsey used and how it was
constructed is difficult. The problem is that the description of the data
is so vague, the price indices uncertain, lags, etc., . . . I do not for a
moment think anybody cooked the books. What I think happened was that
lots of variations were tried and the most plausible was published without
keeping a good record of how the most plausible was put together (letter
to the author from M. Steuer, 21 July 1993).
Conclusion
Phillips (1958a) fit a nonlinear curve to money-wage inflation and unemployment data for 1861-1913 by means of a time-honored, simple
regression method and superimposed the fitted curve to data for 19141957. I repeated Phillipss estimates of the Phillips curve for 1861-1913
and confirmed the presence of counterclockwise loops around the curve
due to the influence of unemployment changes on wage inflation. Lipsey
(1960) said he applied multiple regression to Phillipss data in order to
replicate Phillipss estimates. No problem arises in repeating Lipseys
replication of Phillipss curve and loops for 1861-1913. But I could not
approximate Lipseys estimates of the Phillips curve for 1914-57 and
arrived at different signs and levels of statistical significance in respect
to the loops.
Three possibilities might explain why I could not repeat the estimates of Lipsey (then a novice at econometrics): computational and keypunching mistakes, accumulating round-off error during subroutines, and
data problems. I found definite evidence of data problems. That I have
applied Phillipss data for 1861-1939 and 1948-57 is clear since my
data sources, scattergraphs, and estimates match those of Phillips. I have
shown that for Lipsey to have obtained the results that he got requires
that he used different data from that which he claimed to have used.
The crux of the repeatability of the Phillips and Lipsey exercises is in
the accuracy of the records that they kept of their work. Phillipss training in electrical engineering probably accustomed him to keep detailed
project reports. As a matter of course, he kept records of each step taken
on the Phillips curve project, as well as steps the project did not but could
have taken. Phillips also was a time-series expert who carefully defined
and constructed his variables from the raw statistics. Lipsey received
training mainly in economic theory at LSE in the 1950s. Self-taught in
. 1957. StabilisationPolicy and the Time-Forms of Lagged Responses. Economic Journal 67.266:265-77.
. 1958a. The Relation between Unemployment and the Rate of Change of
Money Wage Rates in the United Kingdom, 1861-1957. Economica 25.100:28399.
. 1958b. La cybhetique et le contr6le des systkmes kconomiques. Etudes
sur la cybeme'tique et 1 'konomie, n.s., 2 1:4 1-50.
. 1959. Wage Changes and Unemployment in Australia, 1947-58. Economic
Society of Australia and New Zealand, New South Wales Branch Economic Monograph 219 (August).
. [ 19661 1978. Estimation of Systems of Difference Equations with Moving
Average Disturbances. In Stability and Injlation. Edited by A. R. Bergstrom. New
York: Wiley.
. 1968. Models for the Control of Economic Fluctuations. In Model Building in Economics and Industry. Papers from a conference organized by C-E-I-R
Limited, 4-6 July 1967. New York: Hafner.
Phillips, A. W. H., and M. H. Quenouille. 1960. Estimation, Regulation, and Prediction in Interdependent Dynamic Systems. Bulletin de 1 'institute internationale de
statistique 73.2:335-43.
Pindyck, R. S., and D. L. Rubinfeld. 1991. Econometric Models and Economic
Forecasts. New York: McGraw-Hill.
Popper, K. R. 1959. The Logic of Scientijc Discovery. London: Hutchinson.
. 1968. On the Theory of the Objective Mind. Proceedings of the Fourteenth
International Congress of Philosophy (2-9 September). Vienna: Herder.
Prest, A. R. 1948. National Income of the UK, 1870-1946. Economic Journal
50.229:31-62.
Routh, G. 1959. The Relation between Unemployment and the Rate of Change of
Money Wages: A Comment. Economica 26.104:2993 15.
Salmon, M. 1982. Error Correction Mechanisms. Economic Journal 92.367:6 15-29.
Santomero, A., and J. Seater. 1978. The Inflation-UnemploymentTrade-off A Critique of the Literature. Journal of Economic Literature 16.2:499-544.
Sleeman, A. 1983. Essays on the United Kingdom Phillips Curve. Ph.D. diss., Simon
Fraser University.
Smith, J. G., and A. J. Duncan. 1944.Fundamentals of the Theory of Statistics. Vol. 1 .
London: McGraw-Hill.
Smyth, D. 1979. Unemployment Disperson and Phillips Loops: A Direct Test of the
Lipsey Hypothesis. Oxjiord Bulletin of Economics and Statistics 4 1.5:227-33.
Stigler, S. M. 1986. The History of Statistics. Cambridge: Harvard University Press.
Sturges, H. A. 1926. The Choice of a Class Interval. Journal of the American Statistical Association 23:65-66.
Turing, A. M. 1948. Rounding-Off Errors in Matrix Processes. Quarterly Journal of
Mechanics and Applied Mathematics 1:287-308.
von Neumann, J., and H. H. Goldstine. 1947. Numerical Inverting of Matrices of
Data Sources
Money-Wage Index w
1861-1920: Phelps, Brown, and Hopkins 1950,276,281, table d, column 2 (Phillips 1958,293); identical to the Phillips archives, column (a).
192147 Ministry of Labour Gazette, April 1958, p. 133, index of
hourly wage rates for end December, except for June 1947 (Phillips
1958, 293), differ from the figures in Phillipss ,archives, column (a),
labeled Weekly Wage Index, M.O.L., 2nd December.
Unemployment x
1860-1920 Beveridge 1944, 312-14, table 22, column labeled Employment Rate (T. u.) (Phillips 1958,290,293)is identical to Phillipss
archives, column (d).
1921-39 Ministry of Labour Gazette, January 1940, p. 2, column labeled Percentage unemployed: Great Britain and Northern Ireland
(Phillips 1958, 293) is identical to Phillipss archives, column (d).
194045 Phillips cited the Ministry of Labour Gazette, January 1940
and following (Phillips 1958,293). The Gazette January 1941-February
1949 shows some monthly, quarterly, or annual numbers in categories of
the labor force. The data are sparse, so Phillips would have had to interpolate to arrive at annual data. My source is column (d) in the Phillips
archives labeled MoLG (Quarterly) for 1940-44 and I.L.O. St. Yearbook for 1945.
I94648 Phillips cited the International Labour Office (ILO) Yearbook
of Labour Statistics (Phillips 1958,293). The ILO Yearbooks revise their
data. In the absence of a specific citation, I used the data in Phillipss
archives column (d) for 194647 labeled I.L.O. St. Yearbook. I used
the unemployment figure for 1948 in the Phillipss archives (column [a],
G.B. unlagged), which is close to the figure in the ILO Yearbook
1951.
1949-57 Phillips cited The Ministry of Labour Gazette. He averaged
the monthly percentages for each year and added 0.1 to approximate the
unemployment rate in the United Kingdom (Phillips 1958, 295-96). In
the absence of data for January 1949 in the 1950 Gazette, I referred to
the unemployment rate in Phillipss archives for 1949 (column [a], G.B.
unlagged), which is close to the average of the February-December
1949 rates in the 1950 Gazette. The 1950-57 mean data based on the
Gazettes are identical to the data in the Phillips archive labeled G.B.
Unlagged (except for a difference of 0.01 percentage points at 2 dates).
The data in the archive labeled G.B. Lagged 7 months 1950-57 is
identical to that based on the Gazettes (except for a difference of 0.01
percentage points at one date).
Definitions
Money-Wage Inflation
1861-1920 First, the central difference of the wage index w (as a proxy
for the absolute rate of change of wage rates during a year) is expressed
(Al.1)
1921-57
y
100
(A1.2)
= est(du/dt) =
- uf-l]/2)
(A1.4)
cu
rn +6
(1/12)
rn -6
(Phillips 1958,297).
(A 1.5)
Money-Wage
Index
1860
1861
1862
1863
1864
1865
1866
1867
1868
1869
1870
1871
1872
1873
1874
1875
1876
1877
1878
1879
1880
1881'
1882'
1883'
1884'
1885'
1886
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
68
68
68
70
73
75
78
77
75
75
78
80
89
96
I00
100
99
98
95
93
93
93
93
94
94
93
93
93
93
96
100
100
100
99
99
98
99
100
Money-Wage
Inflation
Unemployment
Unemployment
Change
0.0
1.4706
3.57 14
3.4247
3.3333
1.282 1
- 1.948 1
- I .3333
2.0
3.205 1
6.875
8.9888
5.7292
2.0
-0.5
-1.0101
-2.0408
-2.6316
- 1.0753
0.0
0.0
0.5376
0.53 19
-0.53 19
-0.5376
0.0
0.0
1.6129
3.6458
2.0
0.0
-0.5
-0.505 1
-0.505 1
0.0
1.0101
1.5
3.7
6.05
4.7
1.95
1.8
2.65
6.3
6.75
5.95
3.75
1.65
0.95
1.15
1.6
2.2
3.4
4.4
6.25
10.7
5.25
3.55
2.35
2.6
7.15
8.55
9.55
7.15
4.15
2.05
2.1
3.4
6.2
7.7
7.2
6.0
3.35
3.45
2.1
0.5
-2.05
- 1.45
0.35
2.25
2.05
-0.175
- 1.5
-2.15
- 1.4
-0.25
0.325
0.525
0.9
1.1
1.425
3.15
-0.5
-3.575
- 1.45
-0.475
2.4
2.975
1.2
-0.7
-2.7
-2.55
- 1.025
0.675
2.05
2.15
0.5
-0.85
- 1.925
- 1.275
-0.2
Table 1 (continued)
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921*
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
19343
1935
Money-Wage
Index
Money-Wage
Inflation
Unemployment
Unemployment
Change
102.0
104.0
108.0
107.0
107.0
106.0
105.0
105.0
107.0
107.0
107.0
107.0
107.0
108.0
11 1.0
115.0
115.0
124.02
135.29
160.1
205.2
268.33
35 8.5 31155.5
286.371121
99.5
98.0
101.0
101.5
100.5
99.0
98.0
98.0
97.5
95 .O
93.5
93.5
90.0
91.5
1.9608
2.8846
1.3889
-0.4673
-0.4673
-0.9434
-0.4762
0.9524
0.9346
0.0
0.0
0.0
0.4673
1.85 19
3.1532
1.739 1
3.9 130
8.1818
13.3333
2 1.8332
26.3736
28.57 14
2.5 157
-22.1865
- 17.7686
- 1.5075
3.06 12
0.495 1
-0.9852
- 1.4925
- 1.0101
0.0
-0.5 102
-2.5641
- 1.5789
0.0
-3.7433
1.6667
2.95
2.05
2.45
3.35
4.2
5 .O
6.4
5.25
3.7
3.95
8.65
8.7
5.1
3.05
3.15
2.1
3.25
-0.7
-0.25
0.65
0.875
0.825
'
.o
0.45
0.6
0.7
2.5
2.55
17.0
14.3
11.7
10.3
11.3
12.5
9.7
10.8
10.4
16.1
21.3
22.1
19.9
16.7
15.5
1.1
0.125
-1.35
-0.65
2.475
2.375
- 1.775
-2.825
-0.975
-0.475
0.05
Table 1 (continued)
Money-Wage
Index
1936
1937
1938
1939
I940
1941
1942
1943
1944
1945
1946
1947
94.0
98.5
99.5
104.0
116.0
126.5
134.0
140.0
146.0
153.5
169.5
176.5/103.0
Money-Wage
Inflation
2.7322
4.7872
1.0152
4.5226
1 1.5385
9.05 17
5.9289
4.4776
4.2857
5.137
10.4235
9.3215
Unemployment
Unemployment
Change
13.1
10.8
12.9
10.5
6.83
2.925
1.025
0.675
0.6
1.2
2.5
3.2
1. Phillipss figure 4a was based on Bowleys wage data. Bowleys indices w for 1880-87
were 72, 72, 75, 75, 75, 73, 72, 73 (1914 = 100)-implying inflation rates y of 2.0833, 2.0,
0.0, - 1.333, -2.0548 (Phillips 1958,291, n. 3; Bowley 1937,30; Phillips Archives). Phillips
did not use the Bowley data when estimating the Phillips curve 1861-1913 (Wulwick 1989,
176-79; 1994,8687).
2. There is an alternative money-wage inflation series for 1921-57 in the archives (column
labeled y%) that is identical to the series arrived at by applying equation (A1.3) to the
money-wage index, except for 1934 and 1947-57 (see table 8). The y-series for 1921-39 is:
-24.95, -19. 13, -1.52, 3.015.0.494, -0.99, -1.504, -1.015,0, -0.51, -2.6, -1.59.0,
0.1 1, 1.65, 2.7,4.67, 1.01,4.42.
3. Probably a transcription error accounts for Phillips using the money-wage index for June
instead of December 1934 of 93.5, giving him zero wage inflation for 1934 (Phillips 1958,
figure 9; Phillips Archives, columns [a], [c]).
Seven-month lead2
dxldr
1.79
1.52
1.62
1.31
1.76
1.59
1.62
I .47
-0.16
-0.20
-0.0 1
-0.33
Table 2 (continued)
Seven-month lead2
dddt
2.08
1.73
1.43
1.18
1.28
1.56
1.61
2.03
1.61
1.275
1.16
1.48
0.73
-0.28
-0.32
-0.26
0.06
0.28
No Lead
1952
1953
1954
1955
1956
1957
~~
Definitions
Price Inflation, Rate of Change of Unemployment, Money-Wage Inflation. 1862-1957. Equation (Al.l), appendix 1 (Lipsey 1960,7, 10).
1861
1862
1863
1864
1865
1866
1867
1868
1869
1870
1871
1872
1873
1874
1875
1876
1877
1878
1879
1880
1881
1882
1883
1884
1885
1886
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
129
130
133
133
130
131
131
130
128
127
130
138
141
133
128
127
127
120
116
121
119
118
118
112
105
103
101
101
103
103
103
104
103
98
96
96
98
101
Price
Inflation
Unemployment
Change
1.538462
1.12782
- 1.12782
-0.76923 1
0.38 1679
-0.38 1679
- 1.153846
- 1.171875
0.787402
4.230769
3.985507
- 1.773050
-4.8872 I8
-2.34375
-0.39370 1
-2.755905
-4.583333
0.43 1034
1.239669
- 1.260504
-0.423729
-2.542373
-5.80357 1
-4.2857 15
- 1.941748
-0.990099
0.990099
0.970874
8.264461
-43.61703
-74.35897
19.44445
84.90566
32.53968
-2.592596
-25.21008
-57.33333
- 84.84849
-26.3 1579
28.26087
32.8 125
40.90909
32.35294
32.38636
50.39999
-4.672897
-68.09524
-40.84507
-20.2 1277
92.3077
4 1.60839
14.03509
-7.329843
-37.76224
-6 1.44579
-50.0000 1
32.14286
60.29412
34.67742
6.493506
- 1 1.80555
-32.08333
-38.0597
-5.797099
-23.72882
0.0
0.4854 37
0.0
-2.9 12621
-3.571429
- 1.041667
1.041 667
2.55 1020
0.495050
Money-Wage
Inflation'
43 1
Table 3 (continued)
~~
Price
Index
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1948
1949
1950
99
105
104
104
105
106
106
107
110
107
108
110
112
115
118
115
107
105
107
104
103
98
98
97
93
86
84
83
83
86
88
93
92
94
97.14
100
103.49
Price
Inflation
Unemployment
Change
2.020202
2.380952
-0.480769
0.480769
0.952381
0.47 1698
0.47 1698
1.869159
0.0
-0.934579
1.388889
1.818182
2.232 143
2.608696
0.0
-12.19512
26.53061
26.1 194
19.64286
22.0
1.953125
-25.7 1429
- 17.56757
62.65823
27.45665
-20.40230
-55.39215
-3 1.96721
- 15.07937
2.38095
0.0
-0.467290
- 1.923077
-2.9 12621
-2.55 102
-0.5 10204
-2.57732
-5.913979
-5.232558
- 1.785714
-0.6024 1
1.807229
2.906977
3.977273
2.150538
0.543478
NA
NA
3.174999
6.135857
- 17.09402
- I .94 1746
9.734512
-6.400002
-8.762886
3.24074
25.48077
33.85093
14.08451
-3.167420
- 13.56784
- 13.17365
-1 1.6129
- 17.93893
-0.925929
- 1.162791
-28.90476
-46.92738
-5.592 I04
-6.48 1483
Money-Wage
Inflation
'
0.765306
1.732673
-0.246305
- 1.24378I
- 1.262626
-0.5 10204
-0.255 102
- 1.538462
-2.105263
-0.8021 39
0.278073
1.1 11464
2.186872
3.722984
2.79 19
2.7638 19
7.9400 12
2.803738
3.2 1 1009
7.456 14
Table 3 (continued)
1951
1952
1953
1954
1955
1956
1957
1958
Price
Index
Price
Inflation
112.70
119.60
122.54
126.03
128.25
135.56
140.32
143.51
7.147294
4.113714
2.623633
2.265333
3.715399
4.45 1906
2.832809
Unemployment
Change
17.55725
10.09616
-18.78613
- 19.40560
-6.382978
15.03906
32.69231
Money-Wage
Inflation
7.936508
4.477612
3.623 188
5.555556
7.142858
6.325302
4.2857
1 . Lipsey used the same money wage inflation data as Phillips for 1861-1913.
la
1861-1 9 13
-0.9
1b2
- 1.002
9.638
-1.394
k
-1.317
m
1.1
R2
-
1861- 1913
(0.515)
(0.058)
8.732
(0.747)
(0.0)
-1.292
(0.253)
(0.0)
-2.526
1.187 0.79
(1.15) (0.382) (0.0)
(0.034) (0.003)
1c3
1861-19 13
1948-57
-1.194
(0.621)
(0.059)
10.367
(0.759)
(0.0)
-1.313
(0.26)
(0.0)
-1.214
0.682
0.79
(0.91) (0.543) (0.0)
(0.185) (0.21)
2a4
1861-1913
z = 1..4
0<
<5
-0.9
9.638
-1.394
2b5
1861-1913
-0.883
(0.589)
(0.14)
8.939
-1.384
DW
-
1.22
x,
(0.944)
(0.0)
(0.3 18)
(0.0)
0.64
(0.0)
0.78
Table 4 (continued)
equation
2c3
1948-57
2d6
1948-57
2e3
1861-1913
1948-57
-1.16
(0.677)
(0.092)
R2
DW
0.37
(0.06)
1.55
(0.1)
-1.655
(0.77)
(0.064)
10.192
(3.317)
(0.015)
-1.545
(0.86)
(0.1 1)
0.27
(0.13)
1.47
10.363
(0.842)
(0.0)
-1.328
(0.289)
0.72
1.01
b
10.95
(3.28)
(0.0)
(0.0)
1. All least-squares estimates result from using micro-TSP 7.0h. The first row of bracketted
numbers under the estimated coefficients are standard errors and the second row are levels of
statistical significance. The signs of 2 appear as if a were on the right-hand side of the equations.
Solutions may be sensitive to starting parameter values.
2. In the absence of a special test to see if least-squares estimates in equations ( 1 a) and (1b)
are statistically different, treat the estimates of equation (la) as the null hypothesis. The F-ratio
given the sum of squared residuals from the two equations, five variables and 48 degrees of
freedom is 1S76. The observed significance level of 0.185 supports the hypothesis of a minor
difference between the two estimates (Pindyck and Rubinfeld 1991, 110-1 1).
The estimates of k in Gilbert (1976, tables 1 and A2) and Wulwick (1989, 176, equation 7a)
0
differ from the estimate in equation ( 1 b) because the two earlier studied defined x in terms of
equation A I . 1 instead of A2 (appendix 1 ).
3. With Phillipss seven-month lead in unemployment.
4. The estimates are based on the Woods data without the Bowley substitution (Wulwick 1989,
176-78). Phillips did not use Bowley data in obtaining numerical estimates of the inflationunemployment relation (Wulwick 1994, 87).
5. These estimates of equation (2) are identical to those of Gilbert (1976), who used nonlinear
least squares, and are close to those of Oliver, who used maximum likelihood (Oliver 1986,
223).
6. Without the lead in unemployment. For 1948-57, adding ( x m ) ( d x / d r )or d x / d r as independent variables made all the estimated coefficients in equation (2)-with or without the lead in
x-highly insignificant.
In the absence of a special test to see if the estimates of equation (2) 1948-57 with and
without the lead in unemployment are statistically different, treat the no lead estimates as the
null hypothesis. The F-ratio given the sum of squares residuals from the two equations, two
variables, and eight degrees of freedom is 0.69. The observed significance level of 0.53 supports
the hypothesis of an insignificant statistical difference between the two estimates (Pindyck and
Rubinfeld 1991, 110-1 I ) .
3L2
-1.23
1862-1 9 13
33
1862-1913
-1.232
(.463)
(.011)
6
5.996
(2.389)
(.016)
R2
DW
3.05
-.021
0.79
n.a.
3.061
(2.423)
(.213)
-.021
(.004)
(0.0)
0.79
(0.0)
1.15
0.82
n.a.
4L
-0.94
1862-1 9 13
4.92
3.66
-0.016
44
1862-1913
-0.936
(.45)
(.043)
4.916
(2.285)
(0.037
3.673 -0.016
0.198 0.82
(2.292)
(.004) (.074) (0.0)
(.116) (0.0) (0.01)
1.12
5LS
1923-39
1948-57
0.74
0.43
(2.1)
[.84]
11.18
(6)
[.076]
0.038 0.69
(.012) (0.08)
[.005] [O.O]
0.91
(0.0)
1.7
5
1923-38
1949-57
.847
(.289)
(.008)
1.617
(1.572)
(.316)
4.622
(2.82)
(.l 16)
0.008
.618 0.94
(.012) (.078) (0.0)
(.485) (0.0)
1.7
6L
1923-29
n.a.
n.a.
1.91
6L
1929-39
n.a.
n.a.
6L
1948-57
n.a.
n.a.
3.28
-6.25
0.2
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
6
1923-29
0.306
7.61 1
(4.803) (5 1.487)
(.953)
(.892)
1.8
6
1929-38
-0.96
29.291
(2.322) 33.273
(.692)
(.402)
-0.003
0.481 0.92
1.64
(.059) (.324) (.001)
(.954) (.188)
66
1949-57
-2.379
7.246
(2.142) (3.095)
(.317)
(.066)
-0.014
0.76
(.021) (.22)
(0.52)
(.02)
0.81 2.1
(0.031
Table 5 (continued)
equation
DW
8.385
(.742)
-0.0 17
0.81
(0.0)
1.06
(0.004
(0.0)
0.186
(.075)
(.016)
-0.014
(.004)
0.282
(.06)
0.86
(0.0)
1.19
0.93
(0.0)
1.47
R2
66
1862-1 9 13
-1.519
(.268)
(0.0)
6
1862-19 13
1949-57
- 1.496
(.267)
(0.0)
0.627
(.266)
(.023)
6
1923-38
1949-57
(0.0)
8.5
(.684)
3.793
(.878)
(.0003)
(0.0)
(0.0)
(0.0)
-
0.007
(.012)
(35)
0.6
(0.08)
(35)
1. The following are the corresponding equation numbers in Lipsey 1960: 3:7,4:9-10.5: 12-13.
6: 14. Estimates in the table marked L are from Lipsey 1960.
2. All estimates are based on the Woods data without the Bowley substitution (Wulwick 1994,
86-87).
3. My equation (3) estimates are close to Gilberts estimates (Gilbert 1976, table 1: a4).
4. My equation (4) estimates are identical to Sleemans estimates (Sleeman 1983,28). Wulwick
(1994. 87) discusses the effects of including the two unemployment variables.
5. The author found the statistical levels of significance. The range of the Durbin-Watson statistic
corresponds to Lipseys report of no evidence of significant auto-correlation of the residuals
for lags of one . . . period at the 5 per cent probability level (1960, 26).
6. Had Lipsey reported these estimates, an economist in 1960 well trained in econometrics
would have accepted that the coefficient estimates for 1862-1913 fit the 1949-57 data. The null
hypothesis is that the coefficient estimates remain the same. The F-ratio for the variance of 194957 residuals (actual wage inflation less inflation predicted from the 1862-19 13 coefficients)
given four variables and five degrees of freedom is 1.66. The observed level of significance is
0.32.
5
1923-38
1949-57
0.877
(.467)
(.075)
-0.397
(2.54)
(.877)
6
1923-29
-2.3
(9.97)
(.833)
30.84
(106.89)
(.792)
R2
DW
7.983
(4.551)
(.095)
0.063
(.019)
(.004)
0.704
(.126)
(0.0)
0.87
(0.0)
1.78
0.048
0.5
(.724)
(.539)
0.25
(0.81)
1.8
(.064)
(0.5 1)
Table 6 (continued)
equation
6
1929-38
- 1.82
(3.69)
(0.64)
b
38.51
(52.88)
(.494)
6
1949-57
-4.07
(3.73)
(.326)
9.8
(5.394)
(. 129)
0.038
(0.51)
(0.31)
0.054
(.036)
(.191)
e
0.57
(0.5 1)
(0.3 1)
0.695
(.392)
(.136)
R2
0.81
(0.01)
DW
2.5
0.73
(0.07)
0.88
Y ,x
y , x-'
y , x-4
1923-39/1948-57
1 862- 1913
0.38
0.74
0.47
0.2 1
0.05
0.12
0.001
0.13
0.30
0.28
0.022
0.022
0.28
0.35
0.76
0.13
0.73
0.76
0.55
0.61
y, x
1923-3811 949-57
y-Data of
Table 2A
Table 2B
y, P
-T,P
0
;r,
0.47
0.10
0.48
0.09
0.01
0.05
I. Lipsey 1960, 26. The formula for the squared partial correlation coefficient r 2 given five
variables is r:(3),s42 = Rt,2345 - R:,24s/1 - R;,24s (Croxton and Cowdon 1955,551).
0
2. The estimate of the squared partial correlation coefficient between y and x using the formula
in the textbook from which Lipsey learned statistics is 0.01 (Smith and Duncan 1944,467).
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
3.73
1.82
4.4
10.61
5.28
2.9
4.88
6.58
7.31
5.5
-
3.8 1
I .85
4.48
10.0
6.15
2.94
4.26
6.7 1
7.5
5.28
-
3.9
1.9
4.6
10.5
6.4
3.O
4.4
6.9
7.9
5.4
-
2.8037
3.21 10
7.456 1
7.9365
4.4776
3.6232
5.5556
7.1429
6.3253
4.2857
3.8835
1.8692
4.5872
10.5263
6.3492
2.985 1
4.3478
6.9444
7.7922
5.4217
103
107
109
114
126
134
138
144
154
166
175
181
Range
Mean
Median
1
1.82-10.61
2
1.85-10
5.3
5.3
5.08
4.88
Columns
3
1.9-10.5
5.49
5 .O
2- 1
10.051-10.871
10.004(
I. 161
3- 1
10.081-11. 121
10. 191
I. 181
1
1
1.39
Correlation
m
0
0
0.19
0.002'
0.0032
0.0032
Table 9 (continued)
Parameters
2
3
10
Correlation
2
3
0.0162
0.0302
0.0272
10
-2.35
13.08
10.46
10.19
9.99
9.83
9.72
9.64
9.58
- 1.76
- 1.67
- 1.59
- 1.52
- 1.45
- 1.39
- 1.34
0.4
0.2
0.17
0.13
0.09
0.05
0.016
0.01 8
0.0
0.4
0.5
0.6
0.7
0.8
0.9
1
.o
R2
.2
.7
.9
1 .O
.306
.329
.376
.385
.387
1.1
.388
1.2
1.3
1.5
2 .o
.387
.385
.378
.330
Estimating m and k
Sum of Squared Residuals
-1
-1
-r
Ifhi = I . l , t h e n i = -1.315.
Standard Error of
Regression
61.37
59.23
55.19
54.36
54.15
1.09
1.07
1.03
1.022
1.020
55.08
1.019
54.15
54.36
55.18
59.12
1.020
1.022
1.03
1.07
-1