A Cautionary Note on the Order of Integration of Post-War Aggregate Wage, Price and Productivity Measures

We investigate the order of integration of aggregate wage, price and productivity measures for the USA. Our investigation differs from previous studies as we employ recently developed tests that allow, under the alternative hypothesis, for structural change between periods in which the data are integrated of order zero, I(0), and integrated of order one, I(1). The tests reveal that some of the time series examined are neither exclusively I(0) or I(1) and that in fact breaks in the order of integration have occurred, suggesting the need for caution when undertaking Granger-causality tests involving these variables