Dear Stata users,
Thank you in advance for your kind response.
I have a panel dataset of 30 countries for 15 years.
My dependent variables are the number of openings (model a) or closures (model B) of manufacturing plants in a country in a year. My independent (or predictors if you like) variables are 5 macroeconomic indicators. One of them is labor cost and I use "wage in constant USD" as a measure. I have been asked to consider the use of "wage change" or "wage relative to competitor/nearby countries" instead.
One problem that I see in "wage change" is that although it offers comparability across time, it lacks of comparability across countries. "wage relative to competitor/nearby countries" offers comparability in both dimensions, but a big question is how to construct it.
I have two questions:
a) is it safe to argue that the fact that "wage in constant USD" offers comparability across time and countries makes it a good choice, at least better than "wage change"?
b) if the answer to a) is "not", does it make sense to use both "wage in constant USD" and "wage change" in the same model?
Thank you in advance for your answers.
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