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Intersectoral Wage Linkages in Sweden

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  • Friberg, Kent

    ()
    (Monetary Policy Department, Central Bank of Sweden)

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    Abstract

    The purpose of this study is to investigate if the wage setting in certain sectors of the Swedish economy influences the wage setting in other sectors. The theoretical background is the Scandinavian model of inflation, which states that the wage setting in the sectors exposed to international competition should influence the wage setting in the sheltered sectors of the economy. The Johansen maximum likelihood cointegration approach is applied to quarterly data on Swedish sector wages for the period 1980:1–2002:2. Different vector error correction (VEC) models are created based on assumptions of which sectors are and which sectors are not exposed to international competition. The wage adaptability between sectors is then tested by imposing restrictions on the estimated VEC models. Finally, Granger causality tests are performed in the different restricted/unrestricted VEC models to test for sector wage leadership. The empirical results indicate large wage adaptability between manufacturing, construction, wholesale and retail trade, the central government sector and the municipalities and county councils sector. This is in line with the assumptions of the Scandinavian model. Furthermore, the empirical results indicate low wage adaptability between the financial sector and manufacturing, and between the financial sector and the two public sectors. The Granger causality tests provide strong evidence of the existence of intersectoral wage causality, but no evidence of a wage leading role in line with the assumptions of the Scandinavian model for any of the sectors.

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    Bibliographic Info

    Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 158.

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    Length: 47 pages
    Date of creation: 01 Dec 2003
    Date of revision:
    Publication status: Forthcoming in Empirical Economics.
    Handle: RePEc:hhs:rbnkwp:0158

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    Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
    Phone: 08 - 787 00 00
    Fax: 08-21 05 31
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    Web page: http://www.riksbank.com/
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    Related research

    Keywords: Sector wage linkages; Wage leadership; Wage adaptability; Scandinavian model of inflation; Exposed and sheltered sectors; Vector error correction (VEC) models;

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    References

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    1. Holmlund, B. & Ohlsson, H., 1990. "Wage Linkages Between Private and Public Sectors," Papers 1990t, Uppsala - Working Paper Series.
    2. Jurgen A Doornik & Henrik Hansen, . "An omnibus test for univariate and multivariate normalit," Economics Papers W4&91., Economics Group, Nuffield College, University of Oxford.
    3. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
    4. Jacobson, Tor & Ohlsson, Henry, 1994. "Long-Run Relations between Private and Public Sector Wages in Sweden," Empirical Economics, Springer, vol. 19(3), pages 343-60.
    5. Ploberger, Werner & Kramer, Walter & Kontrus, Karl, 1989. "A new test for structural stability in the linear regression model," Journal of Econometrics, Elsevier, vol. 40(2), pages 307-318, February.
    6. 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.
    7. Aukrust, Odd, 1970. "PRIM I: A Model of the Price and Income Distribution Mechanism of an Open Economy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 16(1), pages 51-78, March.
    8. 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.
    9. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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    Citations

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    Cited by:
    1. Cúrdia, Vasco & Finocchiaro, Daria, 2013. "Monetary regime change and business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 37(4), pages 756-773.
    2. Cúrdia, Vasco & Finocchiaro, Daria, 2005. "An Estimated DSGE Model for Sweden with a Monetary Regime Change," Seminar Papers 740, Stockholm University, Institute for International Economic Studies.
    3. Lindquist, Matthew J. & Vilhelmsson, Roger, 2004. "Is the Swedish Central Government a Wage Leader?," Working Paper Series 8/2004, Swedish Institute for Social Research.

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