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Decentralization of wage determination. Evidence from a national teacher reform

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  • Willén, Alexander

    (Department of Economics and FAIR, Norwegian School of Economics)

Abstract

Despite a global trend of wage decentralization over the past 30 years, we know very little about the labor market implications of decentralized wage determination. A main reason is the lack of exogenous variation in wage regulation linked to detailed outcome data. Using Swedish registry data and exploiting a reform that replaced the fixed national pay scale for teachers with individual wage bargaining, I overcome these issues and provide new evidence on the labor market effects of wage decentralization. The paper presents three sets of empirical results. First, I show that the reform significantly changed the wage structure of teachers. Second, I demonstrate that these wage changes did not affect teacher composition or student outcomes. Finally, I find support for a wage spillover effect to substitute occupations, providing evidence on the dynamics of wage determination across occupations. I argue that the wage spillover effect coupled with the compressed Swedish wage structure likely explains the lack of effects on teacher and student outcomes.

Suggested Citation

  • Willén, Alexander, 2019. "Decentralization of wage determination. Evidence from a national teacher reform," Working Paper Series 2019:17, IFAU - Institute for Evaluation of Labour Market and Education Policy, revised 28 Jun 2019.
    • Handle: RePEc:hhs:ifauwp:2019_017
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    Cited by:

    1. Demir, Gökay, 2023. "Labor Market Frictions and Spillover Effects from Publicly Announced Sectoral Minimum Wages," IZA Discussion Papers 16204, Institute of Labor Economics (IZA).
    2. Demir, Gökay, 2022. "Labor market frictions and spillover effects from publicly announced sectoral minimum wages," Ruhr Economic Papers 985, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Martins, Pedro S., 2022. "The wage effects of employers' associations: A case study of the private schools sector," GLO Discussion Paper Series 1163, Global Labor Organization (GLO).
    4. Barigozzi, Francesca & Parasnis, Jaai & Tani, Massimiliano, 2022. "Gender, Motivation, and Self-Selection into Teaching," IZA Discussion Papers 15532, Institute of Labor Economics (IZA).
    5. Dai, Fengyan & Xu, Lei & Zhu, Yu, 2022. "Higher education expansion and supply of teachers in China," China Economic Review, Elsevier, vol. 71(C).
    6. Cook, Jason & Lavertu, Stéphane & Miller, Corbin, 2021. "Rent-Seeking through collective bargaining: Teachers unions and education production☆," Economics of Education Review, Elsevier, vol. 85(C).
    7. Bassier, Ihsaan, 2022. "Collective bargaining and spillovers in local labor markets," LSE Research Online Documents on Economics 118057, London School of Economics and Political Science, LSE Library.
    8. Ihsaan Bassier, 2022. "Collective bargaining and spillovers in local labor markets," CEP Discussion Papers dp1895, Centre for Economic Performance, LSE.

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    More about this item

    Keywords

    Wage regulation; Decentralization; Teacher Labor Market;
    All these keywords.

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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