Gunnar Bårdsen and Ragnar Nymoen 869

wage growth and productivity gains and with changes in the payroll tax rate, as
well as with corrections from an earlier period’s deviation from the equilibrium
price (as a consequence of, e.g., information lags; see Andersen, 1994, Ch. 6.3):

qt−α21,0wt=c 2 +α 22 (L)qt+α 21 (L)wt+β 21 (L)gapt

−β 22 (L)zt+β 25 (L)T (^1) t−γ 22 ecmft−r+ (^2) t, (17.29)
where:
α 2 j(L)=α 2 j,1L+···+α 2 j,(r− 1 )Lr−^1 ,j=1, 2,
β 2 j(L)=β 2 j,0+β 2 j,1L···+β 2 j,(r− 1 )Lr−^1 ,j=1, 2, 5.
Solving equation (17.24) forqt(i.e., the equation is differenced first), and then
substituting out in equations (17.28) and (17.29), the theoretical model condenses
to a wage–price model suitable for estimation and similar to the early equilibrium-
correction formulation of Sargan (1980):
[
1 −a12,0
−a21,0 1
][
w
p
]
t

[
α 11 (L) −a 12 (L)
−a 21 (L) α 22 (L)
][
w
p
]
t

• ⎡
  ⎣^0 β^12 (L) −ζ
  α 12 (L)
  1 −ζ
  −β 14 (L) −β 15 (L) −η
  α 12 (L)
  1 −ζ
  b 21 (L) −b 22 (L) ζα 22 (L) 0 b 25 (L) ηα 22 (L)
  ⎤
  ⎦
  ×
  ⎡
  ⎢⎢
  ⎢⎢
  ⎢
  ⎢⎢
  ⎣
  gap
  z
  pi
  u
  T 1
  T 3
  ⎤
  ⎥⎥
  ⎥⎥
  ⎥
  ⎥⎥
  ⎦
  t
  −
  [
  γ 11 0
  0 γ 22
  ]
  (17.30)
  ×
  [
  1 −
  (
  1 +ζd 12
  )
  −δ 13 ζd 12 δ 15 δ 16 ηd 12
  −( 1 −ζ) 1 ( 1 −ζ) −ζ 0 −( 1 −ζ) −η
  ]
  ×
  ⎡
  ⎢⎢
  ⎢
  ⎢⎢
  ⎢
  ⎢⎢
  ⎢⎣
  w
  p
  z
  pi
  u
  T 1
  T 3
  ⎤
  ⎥
  ⎥⎥
  ⎥⎥
  ⎥
  ⎥⎥
  ⎥⎦
  t−r


• 
  

  [
  e 1
  e 2
  ]
  t
  ,
  where we have omitted the intercepts to save space, and have substituted the
  equilibrium-correction terms using (17.25) and (17.26) above. The mapping from
  the theoretical parameters in (17.28) and (17.29) to the coefficients of the model