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Survey Evidence on Wage Rigidity: Sweden in the 1990s

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  • Agell, Jonas

    ()
    (Department of Economics, Uppsala University)

  • Lundborg, Per

    (Trade Union Institute for Economic Research)

Abstract

We present the results from a repeat survey on wage rigidity in a sample of 159 Swedish firms, conducted during a prolonged period of very high unemployment and very low inflation. We document the virtual absence of wage cuts, and trace this pervasive nominal rigidity to a set of interacting factors, including the legal status of the wage contract, the structure of bargaining institutions, and the design of social insurance. But employees’ concerns about fairness and relative wages also appear to play an important role. In addition, we report new results on underbidding, efficiency wage mechanisms, and unemployment persistence.

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File URL: http://swopec.hhs.se/fiefwp/papers/WP154.pdf
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Bibliographic Info

Paper provided by Trade Union Institute for Economic Research in its series Working Paper Series with number 154.

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Length: 31 pages
Date of creation: 22 Oct 1999
Date of revision:
Publication status: Published in Scandinavian Journal of Economics, 2003, pages 15-29.
Handle: RePEc:hhs:fiefwp:0154

Note: This paper is a revised version of Working Paper 1999:2 of the Office of Labour Market Policy Evaluation, IFAU, and Working Paper 1999:12 of Department of Economics, Uppsala University.
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Keywords: Nominal wage rigidity; Panel data; Recession; Effort models; Unemployment persistence;

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References

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  1. Agell, Jonas & Lundborg, Per, 1993. "Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms," Working Paper Series 380, Research Institute of Industrial Economics.
  2. Bewley, Truman F., 1998. "Why not cut pay?," European Economic Review, Elsevier, vol. 42(3-5), pages 459-490, May.
  3. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
  4. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
  5. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
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  7. Falk, Armin & Fischbacher, Urs, 2006. "A theory of reciprocity," Games and Economic Behavior, Elsevier, vol. 54(2), pages 293-315, February.
  8. Bewley, Truman F, 1995. "A Depressed Labor Market as Explained by Participants," American Economic Review, American Economic Association, vol. 85(2), pages 250-54, May.
  9. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
  10. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
  11. Ernst Fehr & Armin Falk, 2003. "Wage Rigidity in a Competitive Incomplete Contract Market," Labor and Demography 0305001, EconWPA.
  12. Alan S. Blinder & Don H. Choi, 1989. "A Shred of Evidence on Theories of Wage Stickiness," NBER Working Papers 3105, National Bureau of Economic Research, Inc.
  13. Campbell, Carl M, III & Kamlani, Kunal S, 1997. "The Reasons for Wage Rigidity: Evidence from a Survey of Firms," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 759-89, August.
  14. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
  15. Holden, S., 1998. "Wage Drift and the Relevance of Centralised Wage Setting," Memorandum 04/1998, Oslo University, Department of Economics.
  16. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  17. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
  18. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  19. Holden, Steinar, 1994. "Wage bargaining and nominal rigidities," European Economic Review, Elsevier, vol. 38(5), pages 1021-1039, May.
  20. Calmfors, Lars, 1993. "Lessons from the macroeconomic experience of Sweden," European Journal of Political Economy, Elsevier, vol. 9(1), pages 25-72, March.
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Citations

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Cited by:
  1. Strauss, Tove, 2000. "Economic Reforms and the Poor," Working Paper Series 164, Trade Union Institute for Economic Research.
  2. Beissinger, Thomas & Knoppik, Christoph, 2003. "Sind Nominallöhne starr? Neuere Evidenz und wirtschaftspolitische Implikationen," IZA Discussion Papers 800, Institute for the Study of Labor (IZA).
  3. Arai, Mahmood & Heyman, Fredrik, 2004. "Microdata Evidence on Rent-Sharing," Working Paper Series 198, Trade Union Institute for Economic Research.
  4. Thomas Moutos & William Scarth, 2002. "Technical Change and Unemployment: Policy Responses and Distributional Considerations," CESifo Working Paper Series 710, CESifo Group Munich.
  5. Arai, Mahmood & Skogman Thoursie, Peter, 2001. "Incentives and Selection in Cyclical Absenteeism," Working Paper Series 167, Trade Union Institute for Economic Research.
  6. Matthieu Chemin & Joost DeLaat & André Kurmann, 2011. "Reciprocity in Labor Relations: Evidence from a Field Experiment with Long-Term Relationships," Cahiers de recherche 1127, CIRPEE.
  7. Strauss, Tove, 2000. "Structural Reforms, Uncertainty, and Private Investment," Working Paper Series 165, Trade Union Institute for Economic Research.

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