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Cointegrating Sectoral Wages in Sweden - a Maximum Likelihood Approach

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  • Jocobson, T.
  • Ohlsson, H.

Abstract

Using a maximum likelihood cointegration approach, we find two long-run relationships between central government, local government, and private sector wages in Sweden. This means that there is one common trend for the three sectoral wages. Private sector wages are weakly exogenous for the estimation of the long-run relationships. This suggests that the private sector is the wage leader. Testing linear restrictions on the estimated cointegrating space, we reject stationarity for the three relative wages using likelihood ratio-tests. The hypotheses of homogeneity for the two cointegrating vectors, i.e., that wages do not diverge in the long run, is also rejected.

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Bibliographic Info

Paper provided by Uppsala - Working Paper Series in its series Papers with number 1991t.

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Length: 34 pages
Date of creation: 1991
Date of revision:
Handle: RePEc:fth:uppaal:1991t

Contact details of provider:
Postal: UPPSALA UNIVERSITY, DEPARTMENT OF ECONOMICS, S-751 20 UPPSALA SWEDEN.
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Email:
Web page: http://www.nek.uu.se/
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Related research

Keywords: unemployment ; wages;

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References

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  2. Holmlund, B. & Ohlsson, H., 1990. "Wage Linkages Between Private and Public Sectors," Papers 1990t, Uppsala - Working Paper Series.
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  5. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  6. Kunst, Robert & Neusser, Klaus, 1990. "Cointegration in a Macroeconomic System," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(4), pages 351-65, Oct.-Dec..
  7. Nymoen, Ragnar, 1989. "Modelling Wages in the Small Open Economy: An Error-Correction Model of Norwegian Manufacturing Wages," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(3), pages 239-58, August.
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  9. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  10. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220 National Bureau of Economic Research, Inc.
  11. Muscatelli, Vito Antonio & Hurn, A Stan, 1992. " Cointegration and Dynamic Time Series Models," Journal of Economic Surveys, Wiley Blackwell, vol. 6(1), pages 1-43.
  12. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
  13. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  14. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
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Citations

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Cited by:
  1. Pérez, Javier J. & Sánchez, Jesús, 2010. "Is there a signalling role for public wages? Evidence for the euro area based on macro data," Working Paper Series 1148, European Central Bank.
  2. Dustmann, C. & Soest, A.H.O. van, 1995. "Generalized switching regression analysis of private and public sector wage structures in Germany," Discussion Paper 1995-44, Tilburg University, Center for Economic Research.
  3. Afonso, António & Gomes, Pedro Maia, 2010. "Interactions between Private and Public Sector Wages," IZA Discussion Papers 5322, Institute for the Study of Labor (IZA).
  4. D'Adamo, Gaetano, 2011. "Wage spillovers across sectors in Eastern Europe," MPRA Paper 27841, University Library of Munich, Germany.
  5. Lindquist, Matthew J. & Vilhelmsson, Roger, 2004. "Is the Swedish Central Government a Wage Leader?," Working Paper Series 8/2004, Swedish Institute for Social Research.
  6. Kent Friberg, 2007. "Intersectoral wage linkages: the case of Sweden," Empirical Economics, Springer, vol. 32(1), pages 161-184, April.
  7. Ana Lamo & Javier J. Pérez & Ludger Schuknecht, 2012. "Public or Private Sector Wage Leadership? An International Perspective," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(1), pages 228-244, 03.
  8. Johansen, Kare & Strom, Bjarne, 2001. " Wages and Politics: Evidence from the Norwegian Public Sector," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(3), pages 311-31, July.
  9. Bender, Keith A, 1998. " The Central Government-Private Sector Wage Differential," Journal of Economic Surveys, Wiley Blackwell, vol. 12(2), pages 177-220, April.
  10. Gregory, Robert G. & Borland, Jeff, 1999. "Recent developments in public sector labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 53, pages 3573-3630 Elsevier.
  11. Costas Christou, 2013. "The dynamics of wage determination in Romania," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 21(4), pages 713-729, October.
  12. Backman, Mikaela & Bjerke, Lina, 2009. "Returns to Higher Education - a regional perspective," Working Paper Series in Economics and Institutions of Innovation 171, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  13. Joaquín Andaluz, 2011. "Validity of the “Principle of Maximum Product Differentiation” in a unionized mixed-duopoly," Journal of Economics, Springer, vol. 102(2), pages 123-136, March.
  14. Christofides, Louis N. & Pashardes, Panos, 2002. "Self/paid-employment, public/private sector selection, and wage differentials," Labour Economics, Elsevier, vol. 9(6), pages 737-762, December.
  15. Gaetano D’Adamo, 2011. "Wage spillovers across sectors in Eastern Europe," Working Papers 1122, Department of Applied Economics II, Universidad de Valencia.
  16. Gaetano D’Adamo & Mariam Camarero & Cecilio Tamarit, 2013. "Wage leadership models: a country-by-country analysis of the EMU," Working Papers 1317, Department of Applied Economics II, Universidad de Valencia.
  17. Friberg, Kent, 2003. "Intersectoral Wage Linkages in Sweden," Working Paper Series 158, Sveriges Riksbank (Central Bank of Sweden).
  18. Shigeyuki Hamori & Takeshi Hoshikawa & Junya Masuda & Kunihiro Hanabusa, 2009. "Price and Wage Setting in Japan: An Empirical Investigation," Economics Bulletin, AccessEcon, vol. 29(1), pages 38-50.

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