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Prices, Productivity and Wage Bargaining in Open Economies

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Author Info

  • Anders Forslund
  • Nils Gottfries
  • Andreas Westermark

Abstract

According to the standard union bargaining model, unemployment benefits should have big effects on wages, but product-market prices and productivity should play no role in the wage bargain. We formulate an alternative strategic bargaining model, where labour and product-market conditions together determine wages. A wage equation is derived and estimated on aggregate data for four Nordic countries. Wages are found to depend not only on unemployment and the replacement ratio, but also on productivity, international prices and exchange rates. There is evidence of considerable nominal wage rigidity. Exchange rate changes have large and persistent effects on competitiveness. Copyright � The editors of the "Scandinavian Journal of Economics" 2008 .

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 110 (2008)
Issue (Month): 1 (03)
Pages: 169-195

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Handle: RePEc:bla:scandj:v:110:y:2008:i:1:p:169-195

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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

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Cited by:
  1. Brücker, Herbert & Hauptmann, Andreas & Jahn, Elke J. & Upward, Richard, 2014. "Migration and imperfect labor markets: Theory and cross-country evidence from Denmark, Germany and the UK," European Economic Review, Elsevier, vol. 66(C), pages 205-225.
  2. Rita Duarte & Carlos Marques, 2013. "The dynamic effects of shocks to wages and prices in the United States and the Euro Area," Empirical Economics, Springer, vol. 44(2), pages 613-638, April.
  3. Holmlund, Bertil, 2012. "Wage and Employment Determination in Volatile Times: Sweden 1913-1939," IZA Discussion Papers 6509, Institute for the Study of Labor (IZA).
  4. Mikael Carlsson & Stefan Eriksson & Nils Gottfries, 2013. "Product market imperfections and employment dynamics," Oxford Economic Papers, Oxford University Press, vol. 65(2), pages 447-470, April.
  5. Storm, Servaas & Naastepad, C.W.M, 2012. "Wage-led or profit-led supply : wages, productivity and investment," ILO Working Papers 470930, International Labour Organization.
  6. Fromlet, Pia, 2013. "Exchange Rates, Wages, and Export Price Dynamics," Working Paper 132, National Institute of Economic Research.
  7. Bårdsen, Gunnar & den Reijer, Ard & Jonasson, Patrik & Nymoen, Ragnar, 2012. "MOSES: Model for studying the economy of Sweden," Economic Modelling, Elsevier, vol. 29(6), pages 2566-2582.
  8. Bennmarker, Helge & Calmfors, Lars & Larsson Seim, Anna, 2013. "Earned income tax credits, unemployment benefits and wages: empirical evidence from Sweden," Working Paper Series 2013:12, IFAU - Institute for Evaluation of Labour Market and Education Policy.

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