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Politics in wage setting: does government colour matter?

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  • Kåre Johansen

    ()

  • Ørjan Mydland
  • Bjarne Strøm

Abstract

This paper studies the relationship between wage formation and the political colour of the government in an economy with centralized wage bargaining. Ideological, organizational and personal ties between the central trade union and the social democratic political party suggest that the trade union may behave significantly different in wage negotiations under a social democratic than under a conservative government. Using time series data for Norway, we estimate that changing from a conservative to a social democratic central government significantly reduces manufacturing wages and makes wages more responsive to unemployment. This result is consistent with a wage bargaining model augmented by political preferences of the union leaders and suggests that the effect of bargaining coordination depends on the political colour of the government. The estimated effects are both robust with respect to model specification and stable over time.

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Bibliographic Info

Article provided by Springer in its journal Economics of Governance.

Volume (Year): 8 (2007)
Issue (Month): 2 (February)
Pages: 95-109

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Handle: RePEc:spr:ecogov:v:8:y:2007:i:2:p:95-109

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Related research

Keywords: Wages; Political regime; Time series analysis; J31; J51;

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References

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  1. Luca Nunziata, 2002. "Unemployment, Labour Market Institutions and Shocks," Economics Series Working Papers 2002-W16, University of Oxford, Department of Economics.
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  12. Robert J. Flanagan, 1999. "Macroeconomic Performance and Collective Bargaining: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1150-1175, September.
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  14. Kare Johansen, 1997. "The wage curve: convexity, kinks and composition effects," Applied Economics, Taylor & Francis Journals, vol. 29(1), pages 71-78.
  15. Hibbs, Douglas Jr., 1992. "Partisan theory after fifteen years," European Journal of Political Economy, Elsevier, vol. 8(3), pages 361-373, October.
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Citations

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Cited by:
  1. Niklas Potrafke, 2010. "Ideology and cultural policy," TWI Research Paper Series 49, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
  2. Potrafke, Niklas, 2012. "Political cycles and economic performance in OECD countries: Empirical evidence from 1951-2006," Munich Reprints in Economics 19272, University of Munich, Department of Economics.
  3. Bjørnskov, Christian & Potrafke, Niklas, 2012. "Political ideology and economic freedom across Canadian provinces," Munich Reprints in Economics 20277, University of Munich, Department of Economics.
  4. Niklas Potrafke, 2010. "Does government ideology influence budget composition? Empirical evidence from OECD countries," Working Paper Series of the Department of Economics, University of Konstanz 2010-16, Department of Economics, University of Konstanz.
  5. Potrafke, Niklas, 2010. "The growth of public health expenditures in OECD countries: do government ideology and electoral motives matter?," MPRA Paper 24083, University Library of Munich, Germany.

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