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Dimensions of the Wage-Unemployment Relationship in the Nordic Countries: Wage Flexibility Without Wage Curves

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Author Info

  • Karsten Albaek

    (University of Copenhagen)

  • Rita Asplund

    (Research Institute of the Finnish Economy)

  • Erling Barth

    (University of Tromso)

  • Stig Blomskog

    (University College of South Stockholm)

  • Bjorn Runar Gudmundsson

    (Ministry of Finance)

  • Vifill Karlsson

    (Icelandic University College of Business Administration)

  • Erik Strojer Madsen

    (Aarhus Business School)

Abstract

This paper analyses wage formation in the Nordic countries at the regional level by the use of micro-data. Our results deviate systematically from the main conclusions drawn by Blanchflower and Oswald (1994). We find no stable negative relation between wages and unemployment across regions in the Nordic labor markets once regional fixed effects are accounted for. Wage formation at the regional level is characterized by considerable persistence, but unemployment exerts no immediate influence on wages at the regional level. There is no evidence of a wage curve, nor of a Phillips curve, at the regional level in the Nordic countries. The results are consistent with a theoretical model where central bargaining agents determine a national wage increment, and local bargaining agents determine wage drift.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1893.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:1893

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  1. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc.
  2. Holden, S., 1998. "Wage Drift and the Relevance of Centralised Wage Setting," Memorandum 04/1998, Oslo University, Department of Economics.
  3. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
  4. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
  5. Edin, P.A. & Holmlund, B. & Ostros, T., 1992. "Wage Behavior and Labor Market Programs in Sweden: Evidence from Micro Data," Papers 1993-1, Uppsala - Working Paper Series.
  6. Martin Browning & Lars Peter Hansen & James J. Heckman, 1999. "Micro Data and General Equilibrium Models," Discussion Papers 99-10, University of Copenhagen. Department of Economics.
  7. Barro, Robert J, 1988. "The Persistence of Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 32-37, May.
  8. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  9. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  10. Raaum, O. & Wulfsberg, F., 1995. "Unemployment, Labour Market Programmes and Wages in Norway," Memorandum 24/1995, Oslo University, Department of Economics.
  11. Moene, Karl O, 1988. "Unions' Threats and Wage Determination," Economic Journal, Royal Economic Society, vol. 98(391), pages 471-83, June.
  12. repec:fth:prinin:343 is not listed on IDEAS
  13. Rodseth,A. & Nymoen,R., 1999. "Nordic wage formation and unemployment seven years later," Memorandum 10/1999, Oslo University, Department of Economics.
  14. David G. Blanchflower & Andrew J. Oswald, 1995. "An Introduction to the Wage Curve," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 153-167, Summer.
  15. Longva, P. & Raaum, O., 1998. "Unemployment and Relative Earnings of Immigrants," Memorandum 02/1998, Oslo University, Department of Economics.
  16. Kare Johansen, 1997. "The wage curve: convexity, kinks and composition effects," Applied Economics, Taylor & Francis Journals, vol. 29(1), pages 71-78.
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Cited by:
  1. Barth, Erling & Bratsberg, Bernt & Raaum, Oddbjørn, 2003. "Local Unemployment and the Earnings Assimilation of Immigrants in Norway," Memorandum 19/2002, Oslo University, Department of Economics.
  2. Sari Pekkala, 2003. "Is Little Brother Nothing but Trouble?: Educational Attainment, Returns to Schooling and Sibling Structure," Discussion Papers 302, Government Institute for Economic Research Finland (VATT).
  3. Morten Marott Larsen, 2003. "Regional wage differentials - does distance matter?," ERSA conference papers ersa03p418, European Regional Science Association.
  4. Pablo García & Paulina Granados, 2005. "The Wage Curve in Chile," Working Papers Central Bank of Chile 320, Central Bank of Chile.
  5. Victor Montuenga & Roberto Bande & Melchor Fernandez, 2011. "Wage flexibility and local labour markets: homogeneity of the wage curve in Spain," ERSA conference papers ersa11p414, European Regional Science Association.
  6. repec:ese:iserwp:2009-17 is not listed on IDEAS
  7. Sari Pekkala, 2003. "What Draws People to Urban Growth Centers: Jobs vs. Pay?," Discussion Papers 310, Government Institute for Economic Research Finland (VATT).
  8. Maczulskij, Terhi, 2013. "Public–private sector wage differentials and the business cycle," Economic Systems, Elsevier, vol. 37(2), pages 284-301.
  9. García-Mainar , Inmaculada & Montuenga-Gómez , Víctor M., 2012. "Wage dynamics in Spain: evidence from individual data (1994-2001)," Investigaciones Regionales, Asociación Española de Ciencia Regional, issue 24, pages 41-58.
  10. Barth, Erling & Bratsberg, Bernt & Naylor, Robin A. & Raaum, Oddbjørn, 2002. "Explaining Variations in Wage Curves: Theory and Evidence," Memorandum 03/2002, Oslo University, Department of Economics.

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