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Wage Dispersion and Productive Efficiency: Evidence For Sweden

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Author Info
Hibbs Jr., Douglas A. (Department of Economics, School of Economics and Commercial Law, Göteborg University)
Locking, Håkan (Department of Management and Economics, Växjö University)

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Abstract

The effects of wage dispersion on productive efficiency is a topic rich in theoretical conjecture, a common object of Scandinavian polemical debate and at the same time an issue almost barren of systematic econometric evidence. The Swedish record of enormous compression of relative wages under the institutional regime of centralized solidarity bargaining, followed by substantial de-compression of wages after central bargaining broke down, supplies observations well suited for empirical testing of theories and assertions about the response of productive efficiency to shifts in wage distribution. Results presented in this paper obtained from regression experiments based on distribution-augmented production and labor productivity functions yield no support of 'fairness, morale and cohesiveness' theories implying that wage leveling within workplaces and industries may enhance productivity. We do find substantial evidence, however, that reduction of inter-industry wage differentials contributed positively to aggregate output and productivity growth, most likely for the structural reasons first emphasized by leading Swedish trade union economists almost a half century ago.

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Publisher Info
Paper provided by Göteborg University, Department of Economics in its series Working Papers in Economics with number 21.

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Length: 36 pages
Date of creation: 24 Jan 2000
Date of revision:
Publication status: Published in Journal of Labor Economics, 2000, pages 755-783.
Handle: RePEc:hhs:gunwpe:0021

Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, Göteborg University Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research
Keywords: productivity; wages; distribution;

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Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Levine, David I, 1992. "Can Wage Increases Pay for Themselves? Tests with a Production Function," Economic Journal, Royal Economic Society, vol. 102(414), pages 1102-15, September. [Downloadable!] (restricted)
  2. Hibbs, Douglas Jr. & Locking, Hakan, 1996. "Wage compression, wage drift and wage inflation in Sweden," Labour Economics, Elsevier, vol. 3(2), pages 109-141, September. [Downloadable!] (restricted)
  3. Per-Anders Edin & Bertil Holmlund, 1995. "The Swedish Wage Structure: The Rise and Fall of Solidarity Wage Policy?," NBER Chapters, in: Differences and Changes in Wage Structures, pages 307-344 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  4. Edin, Per-Anders & Zetterberg, Johnny, 1992. "Interindustry Wage Differentials: Evidence from Sweden and a Comparison with the United States," American Economic Review, American Economic Association, vol. 82(5), pages 1341-49, December. [Downloadable!] (restricted)
  5. Agell, Jonas & Lundborg, Per, 1995. " Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms," Scandinavian Journal of Economics, Blackwell Publishing, vol. 97(2), pages 295-307, June.
  6. Akerlof, George A & Yellen, Janet L, 1988. "Fairness and Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 44-49, May. [Downloadable!] (restricted)
  7. Agell, Jonas & Lommerud, Kjell Erik, 1993. " Egalitarianism and Growth," Scandinavian Journal of Economics, Blackwell Publishing, vol. 95(4), pages 559-79, December.
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  8. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May. [Downloadable!] (restricted)
  9. Alan B. Krueger & Lawrence H. Summers, 1987. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Chapters, in: NBER Macroeconomics Annual 1992, Volume 7, pages 239-300 National Bureau of Economic Research, Inc. [Downloadable!]
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  11. Addison, John T & Hirsch, Barry T, 1989. "Union Effects on Productivity, Profits, and Growth: Has the Long Run Arrived?," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 72-105, January. [Downloadable!] (restricted)
  12. Moene, Karl Ove & Wallerstein, Michael, 1997. "Pay Inequality," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 403-30, July. [Downloadable!] (restricted)
  13. Flam, Harry, 1987. " Equal Pay for Unequal Work," Scandinavian Journal of Economics, Blackwell Publishing, vol. 89(4), pages 435-50.
  14. Lundberg, Erik, 1985. "The Rise and Fall of the Swedish Model," Journal of Economic Literature, American Economic Association, vol. 23(1), pages 1-36, March. [Downloadable!] (restricted)
  15. Gordon, Robert J, 1986. "Productivity, Wages and Prices Inside and Outside of Manufacturing in the US, Japan and Europe," CEPR Discussion Papers 134, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  16. Pehkonen, Jaakko, 1995. "Wages and productivity growth in the Nordic countries," European Economic Review, Elsevier, vol. 39(6), pages 1181-1196, June. [Downloadable!] (restricted)
  17. Francine D. Blau & Lawrence M. Kahn, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," NBER Working Papers 4678, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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